Question

Moody Corporation uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production 100,000 Fixed manufacturing overhead cost $ 650,000 Variable manufacturing overhead cost per machine-hour $ 3.00 Required: 1. Compute the plantwide predetermined overhead rate. 2. During the year, Job 400 was started and completed. The following information was available with respect to this job: Direct materials $ 450 Direct labor cost $ 210 Machine-hours used 40 Compute the total manufacturing cost assigned to Job 400. 3. If Job 400 includes 52 units, what is the unit product cost for this job? 4. If Moody uses a markup percentage of 120% of its total manufacturing cost, then what selling price per unit would it have established for Job 400?

Answer 1

Answer:

1. Predetermined overhead rate = 9.50 per machine hour

2. Total manufacturing cost = $1040

3. Unit product cost = $20

4. Selling price per unit = $44

Explanation:

1. Fixed predetermine overhead rate

=$\frac{Variable\ manufacturing\ overhead\ cost }{Fixed\ manufacturing\ overhead\ cost}$

= $\frac{650000}{100000}$

= 6.5 per machine hour

Variable predetermine overhead rate

= 3 per machine hour

Total predetermine overhead rate

= Fixed predetermine overhead rate +  Variable predetermine overhead rate

= (6.5+3)

= 9.50 per machine hour

2. Total manufacturing cost

= Direct material cost + Direct labor cost + Manufacturing overhead

== Direct material cost + Direct labor cost + machine hours used × overhead rate

= 450 + 210 + (40 × 9.5)

= $1040

3. Unit product cost

= $\frac{ Total\ manufacturing\ cost}{Number\ of\ units}$

= $\frac{1040}{52}$

= 20

4. Selling price per unit

= Unit product cost + (Unit product cost × markup percentage)

= 20 + (20 × 1.2)

= 20 + 24

= $44

Answer 2

1. The computation of the plant-wide predetermined overhead rate = $9.50 ($650,000/100,000 + $3.00).

2. The computation of the total manufacturing cost assigned to Job 400 is $1,040, computed as follows:

                                 Unit     Total

Direct materials                 $ 450

Direct labor cost                 $ 210

Overhead cost     $9.50    $380

Machine-hours used 40

Total cost of Job 400    $1,040

3. The unit product cost for Job 400 of 52 units is $20 ($1,040/52).

4.  If Moody uses a markup percentage of 120% of its total manufacturing cost, then the selling price per unit for Job 400 is $24 ($20 x 120%).

What is Job Costing?

Job costing is a costing system in which the costs and revenues are tracked according to the jobs.  It is unlike process costing.

Data and Calculations:

Estimated machine-hours = 100,000 hours

Fixed manufacturing overhead cost = $650,000

Variable manufacturing overhead cost per machine-hour = $3.00

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