Kostelnik 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 $237,000, variable manufacturing overhead of $3.90 per machine-hour, and 30,000 machine-hours. The company has provided the following data concerning Job A496 which was recently completed:

-If the company marks up its unit product costs by 40% then the selling price for a unit in Job A496 is closest to:
A) $186.20
B) $272.28
C) $72.08
D) $252.28

Question

Kostelnik 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 $237,000, variable manufacturing overhead of $3.90 per machine-hour, and 30,000 machine-hours. The company has provided the following data concerning Job A496 which was recently completed:
 
-If the company marks up its unit product costs by 40% then the selling price for a unit in Job A496 is closest to:
A) $186.20 
B) $272.28 
C) $72.08 
D) $252.28

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) = $237,000 + ($3.90 per machine-hour × 30,000 machine-hours) = $237,000 + $117,000 = $354,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $354,000 ÷ 30,000 machine-hours = $11.80 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $11.80 per machine-hour × 80 machine-hours = $944
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Kostelnik Corporation Uses a Job-Order Costing System with a Single