Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates: Direct labor-hours required to support estimated production Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour During the year, Job 550 was started and completed. The following information is available with respect to this job: Direct materials Direct labor cost Direct labor-hours. Machine-hours $229 $293 Required: 1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach: a. Compute the plantwide predetermined overhead rate. b. Compute the total manufacturing cost of Job 550. c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550? 2. 15 5 2. Assume that Landen's controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach: a. Compute the plantwide predetermined overhead rate. b. Compute the total manufacturing cost of Job 550. c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550? (Round your intermediate calculations to 2 decimal places. Round your Predetermined Overhead Rate answers to 2 decimal places and all other answers to the nearest whole dollar.) 1. a. Predetermined overhead rate b. Total manufacturing cost of Job 550 c. Selling price Direct labor-hours: Machine-hours: 105,000 52,500 $294,000 $ 3.00 $ 6.00 per DLH
Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates: Direct labor-hours required to support estimated production Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per direct labor-hour Variable manufacturing overhead cost per machine-hour During the year, Job 550 was started and completed. The following information is available with respect to this job: Direct materials Direct labor cost Direct labor-hours. Machine-hours $229 $293 Required: 1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach: a. Compute the plantwide predetermined overhead rate. b. Compute the total manufacturing cost of Job 550. c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550? 2. 15 5 2. Assume that Landen's controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach: a. Compute the plantwide predetermined overhead rate. b. Compute the total manufacturing cost of Job 550. c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550? (Round your intermediate calculations to 2 decimal places. Round your Predetermined Overhead Rate answers to 2 decimal places and all other answers to the nearest whole dollar.) 1. a. Predetermined overhead rate b. Total manufacturing cost of Job 550 c. Selling price Direct labor-hours: Machine-hours: 105,000 52,500 $294,000 $ 3.00 $ 6.00 per DLH
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:## Costing System Analysis for Landen Corporation
**Overview:**
Landen Corporation employs a job-order costing system. At the start of the fiscal year, the company projected the following estimates:
- **Direct labor-hours for production:** 105,000
- **Machine-hours for production:** 52,500
- **Fixed manufacturing overhead cost:** $294,000
- **Variable manufacturing overhead:**
- Per direct labor-hour: $3.00
- Per machine-hour: $6.00
During the year, Job 550 was initiated and finalized. Its associated costs are listed below:
- **Direct materials:** $229
- **Direct labor cost:** $293
- **Direct labor-hours:** 15
- **Machine-hours:** 5
**Tasks Required:**
**1. Based on Direct Labor-Hours Allocation:**
a. **Calculate the plantwide predetermined overhead rate.**
b. **Determine the total manufacturing cost for Job 550.**
c. **Compute the selling price for Job 550 if a 200% markup on total manufacturing cost is used.**
**2. Based on Machine-Hours Allocation:**
a. **Calculate the plantwide predetermined overhead rate.**
b. **Figure out the total manufacturing cost for Job 550.**
c. **Ascertain the selling price for Job 550 given a 200% markup on total manufacturing cost.**
**Note:** For these computations, round the predetermined overhead rate to two decimal places and all other values to the nearest dollar.
### Table Worksheet:
1. **Direct Labor:**
- **Direct labor-hours**
- a. **Predetermined overhead rate** per DLH
- b. **Total manufacturing cost of Job 550**
- c. **Selling price**
2. **Machine-Hours:**
- **Machine-hours**
- a. **Predetermined overhead rate** per MH
- b. **Total manufacturing cost of Job 550**
- c. **Selling price**
This comprehensive analysis will help determine the most cost-effective and accurate allocation method for Landen Corporation.
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