Chapter 3, Problem 3.19AE

Determine the cost of a job and use it for pricing (Learning Objectives 2, 3, & 4)

Playtime Industries manufactures custom-designed playground equipment for schools and city parks. Playtime expected to incur $586,600 of manufacturing overhead cost, 41,900 of direct labor hours, and $1,592,200 of direct labor cost during the year (the cost of direct labor is $38 per hour). The company allocates manufacturing overhead on the basis of direct labor hours. During May, Playtime completed Job 304. The job used 190 direct labor hours and required $14,800 of direct materials. The City of Jonestown has contracted to purchase the playground equipment at a price of 28% over manufacturing cost.

Requirements

1. 1. Calculate the manufacturing cost of Job 304.
2. 2. How much will the City of Jonestown pay for this playground equipment?