Pasko 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 the following data: ?Total direct labor-hours30,000?Total fixed manufacturing overhead cost$258,000?Variable manufacturing overhead per direct labor-hour$2.00Recently Job P660 was completed with the following characteristics:?Number of units in the job50?Total direct labor-hours250?Direct materials$645?Direct labor cost$10,000Required:Calculate the selling price for Job P660 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) = $258,000 + ($2.00 per direct labor-hour × 30,000 direct labor-hours) = $258,000 + $60,000 = $318,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $318,000 ÷ 30,000 direct labor-hours = $10.60 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $10.60 per direct labor-hour × 250 direct labor-hours = $2,650
| ? | Direct materials | $645 |
| ? | Direct labor | 10,000 |
| ? | Manufacturing overhead applied | 2,650 |
| ? | Total cost of Job P660 | $13,295 |
| ? | Total cost of Job P660 (a) | $13,295 |
| ? | Number of units (b) | 50 |
| ? | Unit product cost (a) ÷ (b) | $265.90 |
| ? | Unit product cost for Job P660 | $265.90 |
| ? | Markup (20% × $265.90) | 53.18 |
| ? | Selling price | $319.08 |
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