The more competitive bid, Managerial Accounting

Assignment Help:

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.


Related Discussions:- The more competitive bid

Difference between direct labour and indirect labour, Difference between Di...

Difference between Direct labour and Indirect labour Direct labour:- Labour which plays an active and direct part in the production of a particular commodity is called di

Describe the limitations of management accounting, Describe the Limitations...

Describe the Limitations of management accounting: 1. Based on accounting information: the correctness and effectiveness of managerial decisions will depend upon the quality

Determine the benefit of product life cycle costing, Benefit of product lif...

Benefit of product life cycle costing The benefits of product life cycle costing are summarized as follows: 1) The product life cycle costing results in earlier actions to g

Gathering data-plotting graph-cost estimating relationship, Gather data con...

Gather data concerning the relationship among the dependent and independent variables Collecting data is generally the most hard and time-consuming element of CER development.

Explain the modern control methods, 1. Explain the modern control methods w...

1. Explain the modern control methods with examples. 2. What are the reports produced for performance measurement? Demonstrate.

The least-cost method, The least-cost method The process is described a...

The least-cost method The process is described as follows: Assign as much as possible to the variable with the least unit cost in the whole tableau. (Ties are broken randomly).

Explain the concepts of costs, Explain the concepts of costs. A cost ac...

Explain the concepts of costs. A cost accountant is mainly concerned with the following cost concepts. 1. Concept of objectives: it is this concept that gives direction to

The basic eoq model-the deterministic models, THE BASIC EOQ MODEL This ...

THE BASIC EOQ MODEL This is the most simple of all the models discussed. In addition to the general assumptions which relate to all deterministic models (i.e. certainty of all

Determine abc system and service organizations, ABC System and service orga...

ABC System and service organizations The ABC system has been taken up as applied to a manufacturing organizations with the same efficiency. One basic characteristic of service

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd