Question

Computing Pre-determined Overhead Rates and Job Costs [LO2-1, LO2-2, LO2-3]

Answer 1

Answer and Explanation:

1. The computation of plantwide predetermined overhead rate is shown below:-

(Fixed manufacturing overhead cost ÷ Machine-hours) + Variable manufacturing overhead cost per machine-hour

= ($651,000 ÷ 159,000) + $4.60

= $8.69

2. The total manufacturing cost assigned to Job 400 is shown below:-

Total manufacturing cost assigned to Job 400 = Direct material + Direct labor + Manufacturing overhead

= $370 + $300 + (34 × $8.69)

= $370 + $300 + $295.46

= $965.46

3. The unit product cost is shown below:-

Unit product cost = Total manufacturing cost assigned to Job 400 ÷ Number of units

= $965.46 ÷ 60

= $16

4. The selling price per unit is shown below:-

Selling price per unit = Unit product cost + (Unit product cost × markup percentage)

= $16 + ($16 × 120%)

= $16 + $19.2

= $35.2 per unit

5. As the absorption costing method is chosen so it also considered the fixed also it fails to generate the good analysis for variable costing