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-hours 5 Required: 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? Assume Landen’s controller believes that machine-hours is 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?

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 21E: Ellerson Company provided the following information for the last calendar year: During the year,...

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

Assume Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach:
1. Compute the plantwide predetermined overhead rate.
2. Compute the total manufacturing cost of Job 550.
3. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?
Assume Landen’s controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach:
1. Compute the plantwide predetermined overhead rate.
2. Compute the total manufacturing cost of Job 550.
3. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?