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%.

Question

What will be an ideal response?

Answer 1

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