Question

Comans Corporation has two production departments, Milling and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department’s predetermined overhead rate is based on machine-hours and the Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:
Milling Customizing
Machine-hours 26,000 29,000
Direct labor-hours 11,000 5,000
Total fixed manufacturing overhead cost $153,400 $18,500
Variable manufacturing overhead per machine-hour $1.30
Variable manufacturing overhead per direct labor-hour $5.00
During the current month the company started and finished Job A319. The following data were recorded for this job:
Job A319: Milling Customizing
Machine-hours 70 30
Direct labor-hours 50 60
Direct materials $450 $190
Direct labor cost $580 $570
If the company marks up its manufacturing costs by 20% then the selling price for Job A319 would be closest to:_____.
a. $563.
b. $2,816.
c. $3,379.
d. $4,055.

Answer 1

Answer:

Selling price= $3,379.2

Explanation:

First, we need to calculate the predetermined overhead rate for each department:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Milling= (153,400/26,000) + 1.3= $7.2 per machine hour

Customizing= (18,500/5,000) + 5= $8.7 per direct labor hour

Now, we can allocate overhead and calculate the total cost:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Milling= 7.2*70= $504

Customizing= 8.7*60= $522

Total cost= (450 + 190) + (580 + 570) + (504 + 522)

Total cost= $2,816

Finally, the selling price:

Selling price= 2,816*1.2= $3,379.2