Determine the total cost and product costing method, Cost Accounting

Question

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

(A) (i) Determine 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) Determine the total cost of the proposed job.

(iii)) Determine the company's bid if the bid is based upon full manufacturing cost plus 30%.

(B) (i) Determine the amount of overheads that would be applied to the proposed job if activity-based costing is used.

(ii) Determine the total cost of the proposed job if activity-based costing is used.

(iii) Determine 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: 2/18/2013 4:48:19 AM | Location : United States







Related Discussions:- Determine the total cost and product costing method, Assignment Help, Ask Question on Determine the total cost and product costing method, Get Answer, Expert's Help, Determine the total cost and product costing method Discussions

Write discussion on Determine the total cost and product costing method
Your posts are moderated
Related Questions
STANDARD COSTING STANDARD COSTING is a method, which uses standards for costs and revenues for the idea of control by variance analysis. It can be used either through operation

Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on t

Sales Budget It provides volume of sales and sales mix of the recent operations. The sales forecast is initially prepared and upon completion the sales budget is finalized. Th

what is the meaning of classification of cost in relation to variability?

what are the legal distinctions between a business combination, a merger, and a consolidation.

Considerations in Variance Investigation As already notice above, not all variances are investigated; this is only the material and meaningful as for cost control reasons vari

The Gladys Corporation buys office equipment costing $426,000 on May 12, 2013. In 2015, new and improved models of the equipment make it obsolete, and Gladys sells the old equipme

Freshly Ground Investments have just made an investment of $550 000 in a new Toyota Hilux (with trailer) delivery vehicle. This vehicle will be used for deliveries and generate rev

This question tested their knowledge of intended reporting but more importantly requisite them to apply their knowledge and consider the impact from the investors' perspective.

The Accountant has also asked for you to assist in preparing the statement of financial position (balance sheet) for the Construction in Building partnership for the year ended 30