CMA Study Group

Pricing Help

  • 1.  Pricing Help

    Posted 03-31-2020 03:21 PM
    Can someone explain to me where the $102,000 Variable MOH comes from?

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    Bradley Kilbreth
    Student
    Manchester NH
    United States
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  • 2.  RE: Pricing Help

    Posted 04-01-2020 02:28 AM
    Hi Bradley

    Estimated Direct Materials         29200
    Est Direct Labor                            56000
    Est Variable MOH                          16800  (60% of 28000)


    MOH - Variable   2250
    MOH-Fixed          1500
    Total                     3750

    2250/3750= 60%





  • 3.  RE: Pricing Help

    Posted 04-01-2020 04:32 AM
    Hello Marlon & Bradley,

    Direct labor is the cost driver should be used to allocate only variable manufacturing OH (Exclude all fixed costs)

    Var. MOH = $625 (Supplies) + $1,500 (Indirect labor) + $125 (Power) = $2,250 (Recent year income statement)
    Var. MOH driver rate = $2,250 / $7,500 = $0.30 per $1 DL (Or 30%)
    Estimated Variable MOH for new job order = $56,000 x 30% = $16,800

    Total variable manufacturing cost = $29,000 (DM) + $56,000 (DL) + $16,800 (DOH) = $102,000
    ​Total incremental cost = $102,000 / (1 - 0.1) = $113,333​

    Please accept my apologies, I intended to repeat the calculation in this way to give other students more clarity & explanation.

    Kind regards

    ------------------------------
    Samer Ahmad, FMVA, SCA
    Kuwait
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  • 4.  RE: Pricing Help

    Posted 04-01-2020 04:45 AM
    Dear Samer,

    That's  ok, I can learn too.More ideas are better.