Landen Corporation uses job-order costing. At the beginning of the year, it made the following estimates: Direct
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Question:
Landen Corporation uses job-order costing. At the beginning of the year, it made the following estimates:
- Direct labor-hours required to support estimated production: 140,000
- Machine-hours required to support estimated production: 70,000
- Fixed manufacturing overhead cost: $ 784,000
- Variable manufacturing overhead cost per direct labor-hour: $ 2.00
- Variable manufacturing overhead cost per machine-hour: $ 4.00
During the year, Job 550 was started and completed. The following information pertains to this job:
- Direct materials : $175
- Direct labor cost: $225
- Direct labor-hours:15
- Machine-hour: 5
1. Assume Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base.Under this approach:
- Compute the plantwide predetermined overhead rate.
- Compute the total manufacturing cost of Job 550.
- If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?
2. Assume Landen's controller believes that machine-hours are a better allocation base than direct labor-hours. Under this approach:
- Compute the plantwide predetermined overhead rate.
- Compute the total manufacturing cost of Job 550.
- If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?
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