Question

our categories of overhead. The expected overhead costs for each category for Maintenance Materials handing 26. Stanford Corporation has f next year are as follows: $210,000 90,000 75,000 150,000 Setups Inspection The company has been asked to submit a bid for a proposed job. The plant manacer mbanufacturing this job would result in new business in future years. Bids are usually based upon full manufacturing cost plus 30 percent. Estimates for the proposed job are as follows: Direct materials Direct labor (375 hours) Number of material moves Number of inspections Number of setups Number of machine-hours $5,000 $7,500 2 150 Expected activity for the four activity-based cost drivers that would be used is: Machine-hours Material moves Setups Quality inspections 10,000 2,000 100 4,000 Required a. Determine the amount of overhead that would be allocated to the proposed job if 20,000 direct labor- hours are used as the volume-based cost driver. Determine the total costs of the proposed job. Deter- mine the company's bid, if the bid is based upon full manufacturing cost plus 30 percent. (Round amounts to 2 decimal places.) Determine the amount of overhead that would be applied to the proposed project if activity-based costing is used. Determine the total costs of the proposed job if activity-based costing is used. Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent. (Round amounts to 2 decimal places.) b. c. Which product costing method produces the more competitive bid? (15 points)

Answer 1

Req 1.
Pre-determined OH (based on DLH)
Total Overheads (210000+90000+75000+150000)					525000
Divide: Total DLH					20000
OH rate per DLH					26.25
Oh allocated to Job:
DLH used in Job:			375
OH rate per DLH			26.25
Total Ohh allocated gto job			9843.75
Total Cost of Job:
Material			5000
Labour			7500
OH allocated			9843.75
Total Cost of Job:			22343.75
Selling Bid price:
Total cost of Job			22343.75
Add: markup @ 30%			6703.125
Selling Bid price:			29046.88
Req 2.
STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL
			Activity	Total	Expected	Activity
ACTIVITY COST POOL			Measures	Overheads	Activity	Rate
Maintenance			MH	210000	10000	21.00
Material Handling			Moves	90000	2000	45.00
Setups			Setups	75,000	100	750.00
Inspection			Inspections	150,000	4,000	37.50
Oh allocated:
Activity		Rate	Activity	OH allocated
Maintenance		21	150	3150
Material Handling		45	4	180
Setups		750	2	1500
Inspection		37.5	3	112.5
		Total Overheads		4942.5
Total Cost of Job:
Material			5000
Labour			7500
OH allocated			4942.5
Total Cost of Job:			17442.5
Selling Bid price:
Total cost of Job			17442.5
Add: markup @ 30%			5232.75
Selling Bid price:			22675.25
The Activivty based costing provides the most competitive bid price.