Cull 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 $462,000, variable manufacturing overhead of $2.20 per machine-hour, and 60,000 machine-hours. The company has provided the following data concerning Job X455 which was recently completed:

-If the company marks up its unit product costs by 20% then the selling price for a unit in Job X455 is closest to:
A) $258.32
B) $190.80
C) $39.72
D) $238.32

Question

Cull 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 $462,000, variable manufacturing overhead of $2.20 per machine-hour, and 60,000 machine-hours. The company has provided the following data concerning Job X455 which was recently completed:
 
-If the company marks up its unit product costs by 20% then the selling price for a unit in Job X455 is closest to:
A) $258.32 
B) $190.80 
C) $39.72 
D) $238.32

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) = $462,000 + ($2.20 per machine-hour × 60,000 machine-hours) = $462,000 + $132,000 = $594,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $594,000 ÷ 60,000 machine-hours = $9.90 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $9.90 per machine-hour × 80 machine-hours = $792
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Cull Corporation Uses a Job-Order Costing System with a Single