Asked by Salli Braswell on May 29, 2024
Verified
Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments.Further assume that the company uses a markup of 50% on manufacturing cost to establish selling prices.The calculated selling price for Job J is closest to:
A) $65,115
B) $67,720
C) $21,705
D) $43,410
Departmental Predetermined Overhead Rates
A method of calculating overhead rates for specific departments within a company, rather than using a single overhead rate for the entire organization.
Machine-Hours
A measure of production output or operational time, calculated by the number of hours a machine is run during a specific period.
Markup
A pricing strategy where a seller adds to the cost of the goods to determine the selling price, aimed at ensuring a profit margin above cost.
- Understand the methodology for determining selling prices by adding markups to the costs of manufacturing.
- Acquire an understanding of the connection between manufacturing overhead costs and sales pricing.
- Become proficient at applying overhead through the use of department-specific predetermined rates, utilizing machine-hours as the allocation base.
Verified Answer
Customizing Department predetermined overhead rate: 
Manufacturing overhead applied to Job J: 
The selling price for Job J would be calculated as follows: 
Reference: CH02-Ref31Comans Corporation has two production departments, Milling and Customizing.The company uses a job-order costing system and computes a predetermined overhead rate in each production department.The Milling Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours.At the beginning of the current year, the company had made the following estimates:
During the current month the company started and finished Job A319.The following data were recorded for this job: 
Learning Objectives
- Understand the methodology for determining selling prices by adding markups to the costs of manufacturing.
- Acquire an understanding of the connection between manufacturing overhead costs and sales pricing.
- Become proficient at applying overhead through the use of department-specific predetermined rates, utilizing machine-hours as the allocation base.
Related questions
If the Company Marks Up Its Manufacturing Costs by 20 ...
The Total Amount of Overhead Applied in Both Departments to ...
Assume That the Company Uses Departmental Predetermined Overhead Rates with ...
Opunui Corporation Has Two Manufacturing Departments--Molding and Finishing ...
Nielsen Corporation Has Two Manufacturing Departments--Machining and Assembly ...