Asked by Kevin Vadakkel on May 09, 2024
Verified
Janicki Corporation has two manufacturing departments--Machining and Customizing. The company used the following data at the beginning of the year to calculate predetermined overhead rates: During the most recent month, the company started and completed two jobs--Job A and Job J. There were no beginning inventories. Data concerning those two jobs follow:
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 A is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $27,595
B) $87,752
C) $82,785
D) $55,190
Departmental Predetermined Rates
Overhead allocation rates set in advance for specific departments to allocate indirect costs more accurately.
Markup
An additional amount included in the cost price of products to account for overheads and gain, thereby establishing the price at which they are sold.
Machine-Hours
The total number of hours machines are operated during the production process.
- Implement the assignment of manufacturing overhead to job orders using pre-calculated rates.
- Implement markups to figure out the selling rate of manufactured products.
- Differentiate between plantwide and departmental overhead rates and their impact on product costing.
Verified Answer
Manufacturing Cost = Direct Materials + Direct Labor + Overhead
For Job A:
Direct Materials = $24,930
Direct Labor = $5,650
Overhead = Machining OH Rate x Machining Machine-Hours + Customizing OH Rate x Customizing Machine-Hours
= $18.00 x 1,000 MH + $15.00 x 700 MH
= $18,000 + $10,500
= $28,500
Manufacturing Cost for Job A = $24,930 + $5,650 + $28,500 = $59,080
For Job J:
Direct Materials = $78,300
Direct Labor = $9,000
Overhead = Machining OH Rate x Machining Machine-Hours + Customizing OH Rate x Customizing Machine-Hours
= $18.00 x 2,000 MH + $15.00 x 1,200 MH
= $36,000 + $18,000
= $54,000
Manufacturing Cost for Job J = $78,300 + $9,000 + $54,000 = $141,300
Next, we need to calculate the total cost and selling price for each job, using the 50% markup:
Total Cost = Manufacturing Cost x 150%
Selling Price = Total Cost
For Job A:
Total Cost = $59,080 x 150% = $88,620
Selling Price for Job A = $88,620
For Job J:
Total Cost = $141,300 x 150% = $211,950
Selling Price for Job J = $211,950
Therefore, the calculated selling price for Job A is closest to $82,785 (rounded to the nearest dollar), and the correct answer is C.
Learning Objectives
- Implement the assignment of manufacturing overhead to job orders using pre-calculated rates.
- Implement markups to figure out the selling rate of manufactured products.
- Differentiate between plantwide and departmental overhead rates and their impact on product costing.
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