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Landen Corporation uses a job-order costing system

Accounting

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Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates:

 

   Direct labor-hours required to support estimated production 150,000Machine-hours required to support estimated production 75,000Fixed manufacturing overhead cost$420,000Variable manufacturing overhead cost per direct labor-hour$4.60Variable manufacturing overhead cost per machine-hour$9.20

 

During the year, Job 550 was started and completed. The following information is available with respect to this job:

 

   Direct materials$195Direct labor cost$288Direct labor-hours 15Machine-hours 5

 

Required:

1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach:

a. Compute the plantwide predetermined overhead rate.

b. Compute the total manufacturing cost of Job 550.

c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?

 

2. Assume that Landen's controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach:

a. Compute the plantwide predetermined overhead rate.

b. Compute the total manufacturing cost of Job 550.

c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?