Question

CAN YOU LET ME KNOW IF I ANSWERED THE QUESTIONS RIGHT IF NOT CAN YOU HELP ME SOLVE THEM

Answer 1

Requirement 1:

Average cost per seat using activity based costing

Particulars	$
Direct Materials (21,000 seats * $12 per seat)	252,000
Direct Labor (14,000 hours * $16 per hour)	224,000
Allocated Overhead:
Machining (700 machine hours * $70 per machine hour)	49,000
Assembling (18 parts * 21,000 seats * $0.80 per part)	302,400
Packaging (21,000 seats * $1.60 per finished seats)	33,600
Total cost of order	861,000
Divide by number of seats	21,000
Average cost per seat	41.00

Requirement 2:

Bid Price using ABC

Total cost of order x 110% = Bid Price

Bid Price = $861,000 x 110% = $947,100

Requirement 3:

Particulars	$
Direct Materials (21,000 seats * $12 per seat)	252,000
Direct Labor (14,000 hours * $16 per hour)	224,000
Manufacturing Overheads (14,000 hours * $80 per hour)	1,120,000
Total cost of order	1,596,000
Divide by number of seats	21,000
Average cost per seat	76.00

Bid Price using traditional product costing

Total cost of order x 110% = Bid Price

Bid Price = $1,596,000 x 110% = $1,755,600

Requirement 4:

RAP's bid would be higher using the plantwide overhead rate than using ABC. Assuming that the ABC system more accurately captures the costs caused by the order, the traditional plantwide overhead system overcosts the order. This leads to higher bid price that reduces RAP's chance of winning the bid. The ABC system shows that RAP can increase its chance of winning the bid by bidding a lower price and still make a profit.

All the best...