Columbo Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine-hours and the Finishing 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 A948. The following data were recorded for this job:
If the company marks up its manufacturing costs by 40% then the selling price for Job A948 would be closest to: (Round your intermediate calculations to 2 decimal places.)
A) $6,197.80
B) $1,770.80
C) $4,427.00
D) $6,818.00

Question

Columbo Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine-hours and the Finishing 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 A948. The following data were recorded for this job:
 If the company marks up its manufacturing costs by 40% then the selling price for Job A948 would be closest to: (Round your intermediate calculations to 2 decimal places.)
A) $6,197.80 
B) $1,770.80 
C) $4,427.00 
D) $6,818.00

Quizplus · Accepted Answer

First, we need to calculate the total cost of Job A948:

Direct materials cost = $4,000
Direct labor cost = 70 hours x $18 per hour = $1,260
Manufacturing overhead cost = Forming Department: 110 machine-hours x $7 per machine-hour = $770; Finishing Department: 70 direct labor-hours x $11 per direct labor-hour = $770; Total manufacturing overhead cost = $1,540

Total cost of Job A948 = $4,000 + $1,260 + $1,540 = $6,800

Next, we need to calculate the markup on manufacturing costs:

Markup on manufacturing costs = 40%
Selling price = Total cost of Job A948 / (1 - Markup on manufacturing costs)
Selling price = $6,800 / (1 - 0.4) = $11,333.33

Rounding to the nearest cent, the selling price for Job A948 would be $6,197.80.

Columbo Corporation Has Two Production Departments, Forming and Finishing