Kubes Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $90,000, variable manufacturing overhead of $3.50 per direct labor-hour, and 30,000 direct labor-hours. The company has provided the following data concerning Job A477 which was recently completed:

-If the company marks up its manufacturing costs by 20% then the selling price for Job T288 would be closest to:
A) $4,390.00
B) $878.00
C) $5,268.00
D) $5,795.00

Question

Kubes Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $90,000, variable manufacturing overhead of $3.50 per direct labor-hour, and 30,000 direct labor-hours. The company has provided the following data concerning Job A477 which was recently completed:
 
-If the company marks up its manufacturing costs by 20% then the selling price for Job T288 would be closest to:
A) $4,390.00 
B) $878.00 
C) $5,268.00 
D) $5,795.00

Quizplus · Accepted Answer

Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $129,200 + ($1.60 per machine-hour × 19,000 machine-hours)
= $129,200 +$30,400 = $159,600
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $159,600 ÷ 19,000 machine-hours = $8.40 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $8.40 per machine-hour × 80 machine-hours = $672
Assembly Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $77,600 + ($3.00 per direct labor-hour × 8,000 direct labor-hours)
= $77,600 + $24,000 = $101,600
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $101,600 ÷8,000 direct labor-hours = $12.70 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $12.70 per direct labor-hour × 40 direct labor-hours = $508
 11ea7761_194b_4dd6_81a5_5ddf773146a6_TB2580_00 11ea7761_194b_4dd7_81a5_5d8b02669b82_TB2580_00

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