Question

Bassett Corporation has two production departments, Milling and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:

Machining Customizing
Machine-hours 17,000 15,000
Direct labor-hours 3,000 6,000
Total fixed manufacturing overhead cost $102,000 $61,200
Variable manufacturing overhead per machine-hour $1.70
Variable manufacturing overhead per direct labor-hour $4.10

During the current month the company started and finished Job T268. The following data were recorded for this job:

Job T268: Machining Customizing
Machine-hours 80 30
Direct labor-hours 30 50
Direct materials $720 $380
Direct labor cost $900 $1,500
If the company marks up its manufacturing costs by 40% then the selling price for Job T268 would be closest to: (Round your intermediate calculations to 2 decimal places.)

a. $6,763.40
b. $7,440.00
c. $4,831.00
d. $1,932.40

Answer 1

a. $6,763.40

Step-by-step explanation:

The computation of the selling price is shown below:

But before that the predetermined overhead rate is

For machining

= ($102000 ÷ 17,000) + $1.70

= $7.7 per machine hour

For fabrication

= ($61200 ÷ 6000) + $4.10

= $14.30 per labour hour

Now the selling price is

Direct material ($720 + $380) $1,100

Direct labor ($900 + $1,500) $2,400

Machining department overhead (7.7 × 80) $616

Fabrication department overhead (50 × 14.3) $715

Total manufacturing cost $4,831

Markup 40% $1,932.40

Selling price $6,763.40