Levron 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 total fixed manufacturing overhead cost of $58,000, variable manufacturing overhead of $2.00 per machine-hour, and 20,000 machine-hours. The company has provided the following data concerning Job P978 which was recently completed:

-If the company marks up its unit product costs by 30% then the selling price for a unit in Job P978 is closest to:
A) $249.58
B) $229.58
C) $204.10
D) $52.98

Question

Levron 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 total fixed manufacturing overhead cost of $58,000, variable manufacturing overhead of $2.00 per machine-hour, and 20,000 machine-hours. The company has provided the following data concerning Job P978 which was recently completed:
 
-If the company marks up its unit product costs by 30% then the selling price for a unit in Job P978 is closest to:
A) $249.58 
B) $229.58 
C) $204.10 
D) $52.98

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) = $58,000 + ($2.00 per machine-hour × 20,000 machine-hours) = $58,000 + $40,000 = $98,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $98,000 ÷ 20,000 machine-hours = $4.90 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $4.90 per machine-hour × 80 machine-hours = $392
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Levron Corporation Uses a Job-Order Costing System with a Single