Janicki Corporation has two manufacturing departments--Machining and Customizing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:
During the most recent month, the company started and completed two jobs--Job A and Job J. There were no beginning inventories. Data concerning those two jobs follow:

-Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 50% on manufacturing cost to establish selling prices.The calculated selling price for Job A is closest to:
A) $90,707
B) $27,487
C) $82,461
D) $54,974

Question

Janicki Corporation has two manufacturing departments--Machining and Customizing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:
  During the most recent month, the company started and completed two jobs--Job A and Job J. There were no beginning inventories. Data concerning those two jobs follow:
 
-Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 50% on manufacturing cost to establish selling prices.The calculated selling price for Job A is closest to:
A) $90,707 
B) $27,487 
C) $82,461 
D) $54,974

Quizplus · Accepted Answer

The first step is to calculate the estimated total overhead costs in the two departments.
Machining
 11ea7761_1950_7e0c_81a5_87197b963988_TB2580_00 Customizing
 11ea7761_1950_7e0d_81a5_9d6df18041ed_TB2580_00 The second step is to combine the estimated manufacturing overhead costs in the two departments ($5,900 + $45,900 = $51,800) to calculate the plantwide predetermined overhead rate as follow:
 11ea7761_1950_a51e_81a5_29f8d69c8e4d_TB2580_00 The overhead applied to Job A is calculated as follows:
Overhead applied to a particular job = Predetermined overhead rate x Machine-hours incurred by the job
= $5.18 per MH x (700 MHs + 3,600 MHs)
= $5.18 per MH x (4,300 MHs)
= $22,274
Job A's manufacturing cost:
 11ea7761_1950_a51f_81a5_d7b2601b6ef3_TB2580_00 The selling price for Job A:
 11ea7761_1950_a520_81a5_07a56a3ef3ee_TB2580_00

Janicki Corporation Has Two Manufacturing Departments--Machining and Customizing