Opunui Corporation has two manufacturing departments--Molding and Finishing. 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 M. 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 A is closest to:
A) $51,970
B) $72,758
C) $80,034
D) $20,788

Question

Opunui Corporation has two manufacturing departments--Molding and Finishing. 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 M. 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 A is closest to:
A) $51,970 
B) $72,758 
C) $80,034 
D) $20,788

Quizplus · Accepted Answer

The first step is to calculate the estimated total overhead costs in the two departments.
Molding
 11ea7761_1939_e956_81a5_03163d722098_TB2580_00 Finishing
 11ea7761_1939_e957_81a5_15101486523c_TB2580_00 The second step is to combine the estimated manufacturing overhead costs in the two departments ($24,000 + $4,500 = $28,500) to calculate the plantwide predetermined overhead rate as follow:
 11ea7761_193a_1068_81a5_f1b25b087020_TB2580_00 The overhead applied to Job A 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 (2,700 MHs + 400 MHs)
= $5.70 per MH x (3,100 MHs)
= $17,670
Job A's manufacturing cost:
 11ea7761_193a_1069_81a5_f7496f7298bd_TB2580_00 The selling price for Job A:
 11ea7761_193a_377a_81a5_6b1c1d76b0db_TB2580_00

Opunui Corporation Has Two Manufacturing Departments--Molding and Finishing