Comans 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:
If the company marks up its manufacturing costs by 10% then the selling price for Job A319 would be closest to: (Round your intermediate calculations to 2 decimal places.)
A) $3,537
B) $3,215
C) $2,923
D) $292

Question

Comans 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:
 If the company marks up its manufacturing costs by 10% then the selling price for Job A319 would be closest to: (Round your intermediate calculations to 2 decimal places.)
A) $3,537 
B) $3,215 
C) $2,923 
D) $292

Quizplus · Accepted Answer

Milling department predetermined overhead rate = $240,000 ÷ 10,000 machine-hours = $24 per machine-hour
Customizing department predetermined overhead rate = $150,000 ÷ 30,000 direct labor-hours = $5 per direct labor-hour
Total manufacturing costs for Job A319:
Direct materials = $3,500
Direct labor (250 hours × $18 per labor-hour) = $4,500
Manufacturing overhead:
Milling department (30 machine-hours × $24 per machine-hour) = $720
Customizing department (150 direct labor-hours × $5 per direct labor-hour) = $750
Total = $9,470
Markup = 10% of total manufacturing costs = 0.10 × $9,470 = $947
Selling price = Total manufacturing costs + Markup = $9,470 + $947 = $10,417
Selling price for Job A319 is closest to option B, $3,215.

Comans Corporation Has Two Production Departments, Milling and Customizing