Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 50% on manufacturing cost to establish selling prices.The calculated selling price for Job A is closest to:

A) $90,707
B) $27,487
C) $82,461
D) $54,974

Question

Alexandra Valerio · Accepted Answer

Final Answer : C, Explanation :  To calculate the predetermined manufacturing overhead rate, we need to divide the estimated total manufacturing overhead cost by the estimated total machine hours.Let's assume that the estimated total manufacturing overhead cost is $500,000 and the estimated total machine hours are 10,000.Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total machine hours= $500,000/10,000 machine hours= $50/hourNow, let's calculate the manufacturing cost for Job A.Direct materials cost = $16,500Direct labor cost = $24,000Manufacturing overhead cost = $50/hour x 300 machine hours = $15,000Total manufacturing cost = $16,500 + $24,000 + $15,000= $55,500Markup on manufacturing cost = 50%Markup amount = 50% x $55,500 = $27,750Selling price = Manufacturing cost + Markup amount= $55,500 + $27,750= $83,250Therefore, the closest calculated selling price for Job A is $82,461 (rounded to the nearest dollar). The best choice is C. The first step is to calculate the estimated total overhead costs in the two departments.Machining   Customizing   The second step is to combine the estimated manufacturing overhead costs in the two departments ($5,900 + $45,900 = $51,800)to calculate the plantwide predetermined overhead rate as follow:   The overhead applied to Job A is calculated as follows:Overhead applied to a particular job = Predetermined overhead rate x Machine-hours incurred by the job= $5.18 per MH x (700 MHs + 3,600 MHs)= $5.18 per MH x (4,300 MHs)= $22,274Job A's manufacturing cost:   The selling price for Job A:

Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 50% on manufacturing cost to establish selling prices.The calculated selling price for Job A is closest to:

A) $90,707
B) $27,487
C) $82,461
D) $54,974

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Learning Objectives

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Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 50% on manufacturing cost to establish selling prices.The calculated selling price for Job A is closest to:A) $90,707B) $27,487C) $82,461D) $54,974

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Learning Objectives

Learning Objectives

Related questions

Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 50% on manufacturing cost to establish selling prices.The calculated selling price for Job A is closest to:

A) $90,707
B) $27,487
C) $82,461
D) $54,974