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
Which of the following are easy to trace to individual jobs?:   A. direct materials and overhead B. direct materials and direct labor C. direct labor and overhead

a factory operates a small canteen but its annual operation has consistently shown a loss:

The use of standard costs can present a number of potential problems or disadvantages. Most of these problems result from improper use of standard costs and the management by excep

Question: Timothy Ltd uses a flexible budget for overhead costs. The company expects to produce 40,000 units of the product it manufactures. Each unit requires 0.40 direct labo

Weighted Average Method This way is a perpetual weighted average system whereas the issue price is recalculated after one of receipt of stocks taking into accounts both money

Prepare the Material Cost Budget of products of a Company For a company along with many products, a periodic budget would be developed given as: Assume a firm has 3 products X

tHE FIRST SECTION ASSIGEMTN ANSWER FOR HAMPSHIR COMPANY DECISIONS

King Airlines King Airlines is one of many low-cost airlines in Europe. The managers want to expand the business and have an opportunity to purchase a second-hand plane to op

Interstate Manufacturing produces brass fasteners and incurred the following costs for the year just ended: Materials and supplies used Brass $75,000 Repair parts 16,000

Derive a truth table for a combinational logic circuit that is to decode a 4-bit BCD representing a number in the range 0-9 and generate an appropriate 7-bit output to illuminate t