Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach: a. Compute the plantwide predetermined overhead rate. b. Compute the total manufacturing cost of Job 550. c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550? 2. Assume that Landen’s controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach: a. Compute the plantwide predetermined overhead rate. b. Compute the total manufacturing cost of Job 550. c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?

(1) (a) $2.80 per direct labour hour, Overhead absorbed $42, (b) $664 (c) $1,992 (2) (a) $5.60 per machine hour Overhead absorbed $28 (b ) $650 (c) $1,950

Explanation:

The question is not complete, Here is the missing part of the question

Landen corporation uses a job order costing system. At the beginning of the year, the company made the following estimates

Direct labour hours required to support estimated production 115,000

Machine hours required to support estimated production 57,500

Fixed manufacturing overhead cost $322,000

Variable manufacturing overhead cost per direct labour hour $3.40

Variable manufacturing overhead cost per machine hour $6.80

During the year, job 550 was started and completed. The following information is available with respect to this job

Direct materials $252

Direct labour cost $370

Direct labour hours 15

Machine hours 5

Here is the solution

(1)

(a) POAR = Budgeted Overhead / Budgeted labour hours

Overhead = fixed overhead + variable overhead

= 322,000 + 3.40 = 322,003 . 4

Direct labour hours = 115,000

= 322,003 .4 / 115,000

= $2 .80 × actual activity

Actual activity = 15

=2.80 × 15 = 42

Overhead absorbed = $42

(b)

$

Direct materials. 252

Direct Labour. 370

Prime Cost. 622

Add: Absorb overhead 42

Total manufacturing cost 664

(c) Since mark up is a percentage of cost price

Cost + Profit = Selling price

200% × 664 = 1,328

664 + 1,328 = 1,992

The selling price is $1,992

(2)

(a) POAR = Budgeted Overhead / Budgeted machine hour

Overhead = fixed manufacturing overhead + variable manufacturing overhead cost per machine

322,000 + 6.80 = 322,006.8

Machine hours = 57,500

= 322,006.8 / 57,500

= $5.60 × actual activity

Actual activity = 5

= 5.60 × 5 = 28

Overhead absorb = $28

(b)

$

Direct materials. 252

Direct Labour. 370

Prime Cost. 622

Add: Absorbed Overhead 28

Total manufacturing cost. 650

(c) Since mark up is a percentage of cost price

Cost + Profit = Selling price

200% × 650 = 1,300

650 + 1,300 = 1,950

The selling price is $1,950

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