Question

1. Comfort Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winton High School band jacket job.

	Company	Winton High School Job
Direct materials	$40,000	$2,000
Direct labor	$10,000	$400
Manufacturing overhead costs	$45,000
Machine-hours	100,000 mh	900mh

What is the bid price for the Winton High School job if the company uses 40% markup of total manufacturing costs?

1. $3,927
2. $2,058
3. $2,880
4. $2,310
5. None of the above

Answer 1

Manufacturing overhead costs	45000
Divide by Machine-hours	100000
Overhead rate	0.45
	Winton High School Job
Direct materials	2000
Direct labor	400
Manufacturing overhead applied	405	=900*0.45
Total Manufacturing costs	2805
Add: Markup 40%	1122	=2805*40%
Bid price	3927
Option A $3,927 is correct