Mcewan Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on 20,000 direct labor-hours, total fixed manufacturing overhead cost of $182,000, and a variable manufacturing overhead rate of $2.50 per direct labor-hour. Job X941, which was for 50 units of a custom product, was recently completed. The job cost sheet for the job contained the following data:?Total direct labor-hours250?Direct materials$740?Direct labor cost$6,500Required:Calculate the selling price for Job X941 if the company marks up its unit product costs by 20%.

What will be an ideal response?


Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $182,000 + ($2.50 per direct labor-hour × 20,000 direct labor-hours) = $182,000 + $50,000 = $232,000

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $232,000 ÷ 20,000 direct labor-hours = $11.60 per direct labor-hour

Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $11.60 per direct labor-hour × 250 direct labor-hours = $2,900

?Direct materials$740
?Direct labor6,500
?Manufacturing overhead applied  2,900
?Total cost of Job X941 $10,140

?Total cost of Job X941 (a)$10,140
?Number of units (b)50
?Unit product cost (a) ÷ (b)$202.80

?Unit product cost for Job X941$202.80
?Markup (20% × $202.80)  40.56
?Selling price $243.36

Business

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