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

Predetermined overhead rate based on machine-hours = (Total estimated manufacturing overhead cost) / (Total estimated machine-hours) = ($510,000 + $102,000) / 25,500 = $22 per machine-hour

Job C:
Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead = $18,450 + $13,400 + ($22 x 990) = $41,340
Markup on manufacturing cost = 40%
Selling price = Manufacturing cost x (1 + Markup) = $41,340 x 1.4 = $57,876

Job H:
Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead = $21,500 + $12,100 + ($22 x 1,980) = $63,260
Markup on manufacturing cost = 40%
Selling price = Manufacturing cost x (1 + Markup) = $63,260 x 1.4 = $88,172

Therefore, the calculated selling price for Job C is closest to $57,876, which is option B. The first step is to calculate the estimated total overhead costs in the two departments.
Forming 11ea7998_5f59_c54c_911b_0f1451c78f80_TB2627_00_TB2627_00 Assembly 11ea7998_5f59_ec5d_911b_f110390662aa_TB2627_00_TB2627_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: 11ea7998_5f5a_136e_911b_dfec1970c791_TB2627_00_TB2627_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: 11ea7998_5f5a_3a7f_911b_4989912823bb_TB2627_00_TB2627_00 The selling price for Job C: 11ea7998_5f5a_6190_911b_fbf23cd18607_TB2627_00_TB2627_00

Stockmaster Corporation Has Two Manufacturing Departments--Forming and Assembly