Stockmaster Corporation has two manufacturing departments--Forming and Assembly.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 C and Job H.There were no beginning inventories.Data concerning those two jobs follow:
Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 40% on manufacturing cost to establish selling prices.The calculated selling price for Job C is closest to:
A) $96,989
B) $88,172
C) $25,192
D) $62,980

Question

Stockmaster Corporation has two manufacturing departments--Forming and Assembly.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 C and Job H.There were no beginning inventories.Data concerning those two jobs follow:
 Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 40% on manufacturing cost to establish selling prices.The calculated selling price for Job C is closest to:
A) $96,989 
B) $88,172 
C) $25,192 
D) $62,980

Quizplus · Accepted Answer

The first step is to calculate the estimated total overhead costs in the two departments.
Forming
 11ea7761_1926_12c7_81a5_058dd052034e_TB2580_00 Assembly
 11ea7761_1926_12c8_81a5_3976b59dd0a5_TB2580_00 The second step is to combine the estimated manufacturing overhead costs in the two departments ($32,500 + $24,500 = $57,000) to calculate the plantwide predetermined overhead rate as follow:
 11ea7761_1926_39d9_81a5_f17b49d60983_TB2580_00 The overhead applied to Job C is calculated as follows:
Overhead applied to a particular job = Predetermined overhead rate x Machine-hours incurred by the job
= $5.70 per MH x (3,400 MHs + 2,000 MHs)
= $5.70 per MH x (5,400 MHs)
= $30,780
Job C's manufacturing cost:
 11ea7761_1926_39da_81a5_5b2baeb25255_TB2580_00 The selling price for Job C:
 11ea7761_1926_60eb_81a5_8bc869455985_TB2580_00

Stockmaster Corporation Has Two Manufacturing Departments--Forming and Assembly