Question

Sanderlin Corporation has two manufacturing departments--Machining and Finishing. The company used the following data at the beginning of the year to calculate predetermined overhead rates: Machining Finishing Total Estimated total machine-hours (MHs) 5,000 5,000 10,000 Estimated total fixed manufacturing overhead cost $ 26,500 $ 13,500 $ 40,000 Estimated variable manufacturing overhead cost per MH $ 2.00 $ 3.00 During the most recent month, the company started and completed two jobs--Job C and Job L. There were no beginning inventories. Data concerning those two jobs follow: Job C Job L Direct materials $ 12,500 $ 8,200 Direct labor cost $ 20,200 $ 6,400 Machining machine-hours 3,400 1,600 Finishing machine-hours 2,000 3,000 Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. Further assume that the company uses a markup of 20% on manufacturing cost to establish selling prices. The calculated selling price for Job C is closest to:

Answer 1

Answer:

Selling price= $82,704

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

Machining:

Predetermined manufacturing overhead rate= (26,500/5,000) + 2

Predetermined manufacturing overhead rate= $7.3 per machine hour

Finishing:

Predetermined manufacturing overhead rate= (13,500/5,000) + 3

Predetermined manufacturing overhead rate= $5.7 per machine hour

Now, we need to calculate the total cost of Job C:

Job C:

Direct materials $ 12,500

Direct labor cost $ 20,200

Machining machine-hours 3,400

Finishing machine-hours 2,000

Total cost= 12,500 + 20,200 + (3,400*7.3) + (2,000*5.7)

Total cost= $68,920

Finally, the selling price of Job C:

Selling price= 68,920*1.2

Selling price= $82,704