+1-415-670-9189
info@expertsmind.com
Determine the company''s bid
Course:- Managerial Accounting
Reference No.:- EM13388




Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Managerial Accounting

King Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows:

Maintenance

$70,000

Materials handling

30,000

Setups

25,000

Inspection

50,000

Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours. 50,000 direct labor hours are budgeted for next year.

The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually, bids are based upon full manufacturing cost plus 30 percent.

Estimates for the proposed job are as follows:

Direct materials

$2,500

Direct labor (750 hours)

$3,750

Number of machine hours

300

Number of material moves

8

Number of setups

3

Number of inspections

5

In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based driver e.g. direct labor hours. The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers.

Expected activity for the four activity drivers that would be used are:

Machine hours

16,000

Material moves

4,000

Setups

2,000

Quality inspections

8,000

Required:

  1. Determine the company's bid if direct labor hours are used as the volume-based driver and the bid is based upon full manufacturing cost plus 30 percent.
  2. Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent.
  3. Which product costing method produces the more competitive bid? And why?

Problem :- 2

The Knapp Company needs to predict the labor cost in producing small carrot patch dolls. The following production information is available:

Year

Dolls Produced

Labor Hours

Labor Dollars

2005

1,150

 850

$17,000 

2006

1,600

 975

23,400

2007

1,100

 800

25,600

2008

2,100

1,150 

36,800

2009

1,500

 950

34,200

2010

1,300

 875

35,000

The technology has not changed since 2005. Wage rates have steadily increased since 2005; however, management expects no further wage increases in 2011.

Required:

  1. Select the appropriate independent variable for predicting labor cost. Explain the reason for your selection.
  2. Develop an equation to predict for 2011 the labor cost of producing carrot patch dolls. Use the high-low method.
  3. Estimate the labor cost of producing 3000 carrot patch dolls for 2011 if 3,000 dolls are expected to produce.



Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Managerial Accounting) Materials
Twelve individuals agreed to sponsor and promote a group of Little League baseball teams called the Golden Spike Little League. The league was a loosely formed voluntary assoc
Compute the per unit product costs for each of the four products. Compute this cost using ABC allocation for overhead. Show the computation for each per unit product cost in
Are these added to the initial cost? Likewise, the item has annual operating revenue of 2M but also incurs 400K in operating expenses, annual fee of 5K for environmental imp
Should St Vincent Hospital outsource its food-service operation to Mimi's Food Service - Based on your analysis in #1 and #2 above, briefly discuss whether you agree with Vinn
Which of the following best describes vertical analysis? Two capital budget projects are being considered at Alpha Co.  Both projects are acceptable choices, but they have di
Part of your company's accounting database was destroyed when Godzilla attacked the city. You have been able to gather the following data from your files. Reconstruct the re
How do I determine the firms market value with this information? Debt = $7,000, Common stock ($1 par) = 458 and Retained earnings = $17,000. The firms bonds are currentl
Why do product-costing systems using the direct method, sequential method, and reciprocal method allocate service department overhead costs first to the production departmen