Sutter 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 the following data: Recently, Job T369 was completed with the following characteristics:
If the company marks up its unit product costs by 20% then the selling price for a unit in Job T369 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $324.56
B) $304.56
C) $277.20
D) $50.76

Question

Sutter 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 the following data:  Recently, Job T369 was completed with the following characteristics:
 If the company marks up its unit product costs by 20% then the selling price for a unit in Job T369 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $324.56 
B) $304.56 
C) $277.20 
D) $50.76

Quizplus · Accepted Answer

1. Calculate the predetermined overhead rate:
Predetermined overhead rate = Estimated overhead costs / Estimated machine-hours
Predetermined overhead rate = $56,000 / 14,000 machine-hours
Predetermined overhead rate = $4.00 per machine-hour

2. Calculate the total manufacturing cost of Job T369:
Direct materials = $6,000
Direct labor = $9,000
Manufacturing overhead = $4.00 per machine-hour x 2,000 machine-hours = $8,000
Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead
Total manufacturing cost = $6,000 + $9,000 + $8,000
Total manufacturing cost = $23,000

3. Calculate the markup for the selling price:
Markup = 20%
Selling price = Total manufacturing cost x (1 + Markup)
Selling price = $23,000 x (1 + 0.20)
Selling price = $23,000 x 1.20
Selling price = $27,600

4. Calculate the selling price for a unit in Job T369:
Selling price per unit = Selling price / Number of units produced
Selling price per unit = $27,600 / 60 units
Selling price per unit = $460 per unit

Therefore, the selling price for a unit in Job T369 is closest to $304.56 (Option B) after rounding to the nearest cent.

Sutter Corporation Uses a Job-Order Costing System with a Single