Question

Wellington Recycling recycles newsprint, cardboard, and so forth, into recycled packaging materials. ForAfter the new fiscal year began, Hollings Paper Supply asked Wellington Recycling to bid for a job that will the coming year, Wellington estimates total manufacturing overhead to be $359,640. The company's managers are not sure if direct labor hours (estimated to be 9,990) or machine hours (estimated to be 17,982 hours) is the best allocation base to use for allocating manufacturing overhead. Wellington bids for jobs using a 31% markup take 1,975 machine hours and 1,700 direct labor hours to produce. The direct labor cost for this job will be $10 per hour, and the direct materials will total $25,500 over total manufacturing cost. Read the requirements. Requirement 1. Compute the total job cost and bid price if WellingtonRecycling decided to use direct labor hours as the manufacturing overhead allocation base for the year. First calculate the predetermined overhead rate based on direct labor hours. Identify the formula and then compute the rate Estimated yearly overhead costsEstimated yearly direct labor hoursPredetermined overhead rate 359,640 9,990 36 per hour Next we will calculate the total job cost. Job Sheet Direct materials Direct labor Manufacturing overhead 25,500 17,000 61,200 103,700 Total job cost

Answer 1

Note: As the requirement 1 & 2 is already done. I have done the remaining portion i.e. requirement below as below:

Whether or not Wellington wins the bid will depend on the allocation base the company chose to use during the year. Wellington's bid price will be S 135,847 if the company uses the direct labor hours as the allocation base. In this case, the company will probably lose the job to Drund Recycling, since its bid was $125.000. However, Wellington will probably Win the bid if machine hours as the allocation base. Using Machine hours as an allocation base result in a bid price if $ 107.420