The more competitive bid, Managerial Accounting

Hornsby Manufacturing has four categories of overheads. The four categories and the expected overhead costs for each category for next year are as follows:
 
Maintenance  $140,000
Materials handling  60,000
Set-ups  50,000
Inspection  100,000
 
Currently, overheads are applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 50,000 direct labour hours are budgeted.
 
The company has been asked to submit a bid for a proposed job. The factory manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 30%.
 
Estimates for the proposed job are as follows:
 
Direct materials  $5,000
Direct labour (750 hours)  $7,500
Number of materials moves  8
Number of inspections  5
Number of set-ups  3
Number of machine hours  300
 
In the past, full manufacturing cost has been calculated by allocating overheads using a volume-based cost driver - direct labour hours. The factory manager has heard of a new way of applying overhead that uses cost pools and cost drivers.
 
Expected activity for the four activity-based cost drivers that would be used are as follows:
 
Machine hours  16,000
Material moves  4,000
Set-ups  2,000
Quality inspections  8,000 

Required:
 
(A) (i)  Verify the amount of overheads that would be allocated to the proposed job if direct labour hours are used as the volume-based cost driver.
 
(ii)  verifythe total cost of the proposed job.               
 
(iii)) verify the company's bid if the bid is based upon full manufacturing cost plus 30%.                                                                               
 
(B) (i)  Verify the amount of overheads that would be applied to the proposed job if activity-based costing is used.                                                  
 
(ii)  Verify the total cost of the proposed job if activity-based costing is used.
                                                                                                  
(iii)  Verify the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30%.                     
 
(C)  Which product costing method produces the more competitive bid? Provide a logical explanation for the difference between the two bid prices.

Posted Date: 3/16/2013 6:06:36 AM | Location : United States







Related Discussions:- The more competitive bid, Assignment Help, Ask Question on The more competitive bid, Get Answer, Expert's Help, The more competitive bid Discussions

Write discussion on The more competitive bid
Your posts are moderated
Related Questions
Describe the Principles of cost accounting Principles of cost accounting: The fundamental principles of costing are identical and are given below:   1. Cost is related to

Q. What is the issue price for Bond A and B ? On December 31, 20x7, the Jill Corporation issued $20,000,000 of 15 year face value bonds. The bonds pay interest on June 30 and D

What is Sunk cost A cost has been incurred in the past or sunk in the past and is not relevant to the particular decision making, is a sunk cost. If it is decided to replac

Recommend whether marginal or absorption costing should be use for internal monthly reporting

It refers to the length of time given to the buyer to pay for their purchases. Throughout this period no interest is charged on the excellent amount. The credit period usually vari

given the above data what would the breakeven in units and dollars be if u wanted a necessary after tax profit of $ 36,000 (assume a 30% tax rate ) units __________ ales dollars _

What are the Advantages of budgetary control This budgetary control system helps in fixing the goals for the organization as a whole and concerts efforts are made for its achie

INVENTORY CONTROL DECISIONS Factories, workshops, engineering departments handle raw materials used in the manufacture of products. The main objectives in handling these materi

BUDGETARY CONTROLS Control in a business is the process of guiding organization into viable patterns of activity in an environment. The main purpose of a control system is to m