Beans 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 $162,000, variable manufacturing overhead of $2.80 per direct labor-hour, and 60,000 direct labor-hours. Recently, Job K818 was completed with the following characteristics:

Number of units in the job 10

Total direct labor-hours 50

Direct materials $ 920

Direct labor cost $ 1,400

If the company marks up its unit product costs by 40% then the selling price for a unit in Job K818 is closest to:

Job K818 selling price is $363,30

Explanation:

The first thing we have to do is to calculate the fixed overhead rate. So if the company predetermined fixed manufacturing over cost is $162,000 and we calculate the rate based on direct labor-hours and direct labour hours are 60,000, the fixed overhead rate would be $2.7 per hour ($162,000/60,000 hours)

Job K818 consists of 10 units.

It used $920 in materials and cost $1400 in direct labor.

It took 50 labour hours. So overhead is:

Variable: 50*$2.8=140

Fixed: 50*$2.7=$135

Total cost of Job K818 is $920+$1400+$140+$135 = $2595

Unit cost of Job K818 = $259,50

Price of Job K818 = $259.5*1.4 = $363.30