Question

Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours 31,800 Total fixed manufacturing overhead cost $159,000 Variable manufacturing overhead per machine-hour $2 Recently, Job T687 was completed with the following characteristics:
Total machine-hours 32,000
Total fixed manufacturing overhead cost $352,000
Variable manufacturing overhead per machine-hour $3.00

Recently, Job T687 was completed with the following characteristics:

Number of units in the job 10
Total machine-hours 30
Direct materials $660
Direct labor cost $1,320

If the company marks up its unit product costs by 40% then the selling price for a unit in Job T687 is closest to:_________

a. $283.50
b. $103.40
c. $361.90
d. $546.00

Answer 1

Answer:

See below

Explanation:

We will first determine the overhead rate

= cost of manufacturing overhead / cost driver

We will distribute the cost driver which is machine hours

$159,000/32,000 = $4.97

$4.97 fixed + $3 = $8 predetermined overhead rate

We will now apply this to job machine hours

Job machine hours 30

Overhead: machine hours x

Predetermined rate = 30 × 8 = $240

Total cost $1,320 + $660 direct material + $240 overhead = $2,220

Then,

Unit cost = Total cost/ unit

= $2,220/10

= $222

Selling price

= cost + 40% cost

= $222 + $88.8

= $283.50