Sivret Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data:
Recently, Job M598 was completed with the following characteristics:

-If the company marks up its unit product costs by 40% then the selling price for a unit in Job M598 is closest to:
A) $321.35
B) $225.05
C) $86.10
D) $301.35

Question

Sivret Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data:
  Recently, Job M598 was completed with the following characteristics:
 
-If the company marks up its unit product costs by 40% then the selling price for a unit in Job M598 is closest to:
A) $321.35 
B) $225.05 
C) $86.10 
D) $301.35

Quizplus · Accepted Answer

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $624,000 + ($3.10 per machine-hour × 80,000 machine-hours) = $624,000 + $248,000 = $872,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $872,000 ÷ 80,000 machine-hours = $10.90 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $10.90 per machine-hour × 300 machine-hours = $3,270
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Sivret Corporation Uses a Job-Order Costing System with a Single