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
Liquidity ratios Liquidity refers to the ability of concern to meet its current obligations as and when these become due. The short term obligations are met by realizing amount


Cost driver analysis Cost drivers are factors, which determine the costs of an activity i.e. a change in the cost driver will cause a change in the level of total cost relate


Testing the Slope The strong point of the relationship among the dependent variable and each of the independent variables can be determined using 3 methods: 1) Correlation

When to order-Material control If deliveries from suppliers normally take two weeks to arrive, then replenishment orders should be placed with them when the level of stocks rep

Explain Indirect expanses: These are expanses which can't be directly conveniently and wholly allocated to a specific cost centres or cost units examples of such expanses are h

Problem Marginal costing plays a major role in making certain decisions. It provides information to management regarding the behaviour of costs and the incidence of such costs

2. Draw the network diagram for the following problem and indicate a sequence of plans that the company should want to consider in making a time-cost tradeoff. The company is not

At the starting of the year, Asquith Company Ltd initiated a quality improvement program. The program was successful in decreasing scrap and rework costs. To help assess the impact