Nielsen Corporation has two manufacturing departments--Machining 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 F 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 M is closest to:
A) $46,154
B) $41,958
C) $29,970
D) $11,988

Question

Nielsen Corporation has two manufacturing departments--Machining 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 F 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 M is closest to:
A) $46,154 
B) $41,958 
C) $29,970 
D) $11,988

Quizplus · Accepted Answer

The first step is to calculate the estimated total overhead costs in the two departments.
Machining
 11ea7761_193b_e531_81a5_29260bd5818e_TB2580_00 Assembly
 11ea7761_193b_e532_81a5_57007cc001b2_TB2580_00 The second step is to combine the estimated manufacturing overhead costs in the two departments ($5,900 + $19,600 = $25,500) to calculate the plantwide predetermined overhead rate as follow:
 11ea7761_193c_0c43_81a5_1359d53d9c0e_TB2580_00 The overhead applied to Job M is calculated as follows:
Overhead applied to a particular job = Predetermined overhead rate x Machine-hours incurred by the job
= $5.10 per MH x (300 MHs + 2,400 MHs)
= $5.10 per MH x (2,700 MHs)
= $13,770
Job M's manufacturing cost:
 11ea7761_193c_0c44_81a5_7b93e9b3dbb0_TB2580_00 The selling price for Job M:
 11ea7761_193c_0c45_81a5_1befe3ed90a3_TB2580_00

Nielsen Corporation Has Two Manufacturing Departments--Machining and Assembly