Exercise 2-12 (20 minutes)
1. The estimated total manufacturing overhead cost is computed as
follows:
Y = $650,000 + ($3.00 per MH)(100,000 MHs)
Estimated fixed manufacturing overhead ……………..
$650,000
Estimated variable manufacturing overhead: $3.00
per MH × 100,000 MHs …………………………………
300,000
Estimated total manufacturing overhead cost ……….
$950,000
The plantwide predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead (a)
$950,000
Estimated total machine-hours (b) ………….
100,000
MHs
Predetermined overhead rate (a) ÷ (b) …….
$9.50
per MH
2. Total manufacturing cost assigned to Job 400:
Direct materials ……………………………………………….
$ 450
Direct labor …………………………………………………….
210
Manufacturing overhead applied ($9.50 per MH × 40
MHs) …………………………………………………………..
380
Total manufacturing cost ……………………………………
$1,040
3. The unit product cost of Job 400 is computed as follows:
Total manufacturing cost (a) ………………….
$1,040
Number of units in the job (b) ………………..
52
Unit product cost (a) ÷ (b) ……………………
$20
4. The selling price per unit is computed as follows:
Total manufacturing cost ………………………
$1,040
Markup (120% of manufacturing cost) …….
1,248
Selling price for Job 400 (a) …………………..
$2,288
Number of units in Job 400 (b) ………………
52
Selling price per unit (a) ÷ (b) ……………….
$44
Exercise 2-12 (continued)
5. Possible critiques of Moody’s pricing tactics include (1) relying on a
plantwide overhead rate to allocate overhead costs to jobs may distort the
cost base used for cost-plus pricing, (2) relying on an absorption approach
may allocate unused capacity costs to jobs thereby distorting the cost base
for cost-plus pricing, and (3) relying on absorption cost-plus pricing ignores
the customers’ willingness to pay based on their perceived value of the
product or service.
Problem 2-19 (20 minutes)
1. Molding Department:
The estimated total manufacturing overhead cost in the Molding
Department is computed as follows:
Y = $497,000 + $1.50 per MH × 70,000 MHs
Estimated fixed manufacturing overhead ………………
$497,000
Estimated variable manufacturing overhead:
$1.50 per MH × 70,000 MHs …………………………...
105,000
Estimated total manufacturing overhead cost …………
$602,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead (a) .
$602,000
Estimated total machine-hours (b) ……………
70,000
MHs
Predetermined overhead rate (a) ÷ (b) ……..
per MH
Estimated fixed manufacturing overhead ………………
$2.00 per DLH × 60,000 DLHs …………………………
Estimated total manufacturing overhead cost …………
$735,000
Estimated total manufacturing overhead (a) .
Estimated total DLHs (b) ………………………..
DLHs
Predetermined overhead rate (a) ÷ (b) ……..
per DLH
