Amason Corporation has two production departments, Forming and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine-hours and the Assembly 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:??FormingAssembly?Machine-hours16,00011,000?Direct labor-hours2,0006,000?Total fixed manufacturing overhead cost$102,400$66,000?Variable manufacturing overhead per machine-hour$1.90??Variable manufacturing overhead per direct labor-hour?$3.80During the current month the company started and finished Job A950. The following data were
recorded for this job:?Job A950:FormingAssembly?Machine-hours5020?Direct labor-hours2040?Direct materials$665$415?Direct labor cost$520$1,040Required:Calculate the selling price for Job A950 if the company marks up its unit product costs by 30% to determine selling prices.
What will be an ideal response?
Forming Department:
Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $102,400 + ($1.90 per machine-hour × 16,000 machine-hours)
= $102,400 +$30,400 = $132,800
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the = $132,800 ÷ 16,000 machine-hours = $8.30 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $8.30 per machine-hour × 50 machine-hours = $415
Assembly Department:
Assembly Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $66,000 + ($3.80 per direct labor-hour × 6,000 direct labor-hours)
= $66,000 + $22,800 = $88,800
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the = $88,800 ÷ 6,000 direct labor-hours = $14.80 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $14.80 per direct labor-hour × 40 direct labor-hours = $592
Overhead applied to Job A950
| ? | Forming Department | $415 |
| ? | Assembly Department | 592 |
| ? | Total | $1,007 |
| ? | ? | Forming | Assembly | Total |
| ? | Direct materials | $665 | $415 | $1,080 |
| ? | Direct labor | $520 | $1,040 | 1,560 |
| ? | Manufacturing overhead applied | $415 | $592 | 1,007 |
| ? | Total cost of Job A950 | ? | ? | $3,647 |
| ? | Total cost of Job A950 | $3,647.00 |
| ? | Markup ($3,647.00 × 30%) | 1,094.10 |
| ? | Selling price | $4,741.10 |
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