Question

Just for reference do not needs these answered only question 3 at the end

Question

Could you let me know what further details you need other then Incomplete info? I put Questions 1 and 2 in for reference but don't need them answered just need help on 3

Answer 1

If we observe.
The cost of cooper's job using plantwide predetrmined overhead rate will be
Fabrication Machining Assembly Total
Raw material 3000 200 1400 4600
direct labour 2800 500 6200 9500
Overheads 13300(labour cost* recovery rate)
-----------------
Total 27400


Cost of cooper's job as per department wise overhead recovery rate
Fabrication Machining Assembly Total
Raw material 3000 200 1400 4600
direct labour 2800 500 6200 9500
Overheads 4900 2000 1860 8760
(2800*1.75) (500*4) (6200*.3)

Total Cost -22860

The difference between both solution is that, due to plant wise overhead recovery rate of 1.4 per labour cost ,departmen -fabrication and machining was undercharged but department massembly was overcharged and the proportion of assembly was the highest thus overall cost of cooper job was inflated as explained below
    Fabrication Machining Assembly
plantwise rate 1.4 1.4 1.4
department wise rate 1.75 4 .30
difference (.35) (2.6) 1.1


as the cost was wrongly estimated the quotation of the job was also inflated which resulted lose of the contract.
the reasonable mark up on cost of 22860 would have been a win win situation for customer and company both as company would have won this contract and customer could have got a contract in low price.