Lupo 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 T687 was completed with the following characteristics:

-If the company marks up its unit product costs by 40% then the selling price for a unit in Job T687 is closest to:
A) $81.60
B) $305.60
C) $285.60
D) $241.50

Question

Lupo 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 T687 was completed with the following characteristics:
 
-If the company marks up its unit product costs by 40% then the selling price for a unit in Job T687 is closest to:
A) $81.60 
B) $305.60 
C) $285.60 
D) $241.50

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) = $252,000 + ($2.10 per machine-hour × 30,000 machine-hours) = $252,000 + $63,000 = $315,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $315,000 ÷ 30,000 machine-hours = $10.50 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $10.50 per machine-hour × 30 machine-hours = $315
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Lupo Corporation Uses a Job-Order Costing System with a Single