Question

managerial accounting

Exercise - Traditional Allocation Method Brookeville Industries manufactures custom engines for use in the lawn and garden equipment. For the coming year, Brookeville Industries estimates total manufacturing overhead to be $420,000. Overhead is allocated to jobs based on the number of direct labor hours. Direct labor hours are estimated to be 10,000 for the coming year. Brookeville bids for jobs using a 25% markup over total manufacturing cost. Lawn & Garden Equipment asked Brookeville to bid for a job. Selected data for the job follows. Job 101 Direct materials used $23,200 Direct labor hours used 1,450 hours Direct labor wage rate $14/hour What is the bid price for the job? A) $115,550 B) $106,938 C) $130,500 D) $145,000

Answer 1

Predetermined Overhead Rate = $420000/10000 = $42.00 23,200.00 A 20,300.00 A Calculation of Bid Price for the Job: Direct Materials Used Direct Labor (1450 x $14) $ Overhead (1450 x $42) $ Total Job Cost Add: Markup ($104400 x 25%) Bid Price for the Job $ 60,900.00 104,400.00 A U 26,100.00 130,500.00 So, Option C is Correct Answer.