Reference no: EM13939991
OVERHEAD RATES, UNIT COSTS
Xanning Company manufactures specialty tools to customer order. There are three producing departments. Departmental information on budgeted overhead and various activity measures for the coming year is as follows:
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Welding
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Assembly
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Finishing
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Estimated overhead
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$200,000
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$22,000
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$250,000
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Direct labor hours
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4,500
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10,000
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6,000
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Direct labor cost
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$90,000
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$150,000
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$120,000
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Machine hours
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5,000
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1,000
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2,000
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Currently, overhead is applied on the basis of machine hours using a plantwide rate. However, Janine, the controller, has been wondering whether it might be worthwhile to use departmental overhead rates. She has analyzed the overhead costs and drivers for the various departments and decided that Welding and Finishing should base their overhead rates on machine hours and that Assembly should base its overhead rate on direct labor hours.
Janine has been asked to prepare bids for two jobs with the following information:
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Job 1
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Job 2
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Direct materials
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$4,500
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$8,600
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Direct labor cost
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$1,000
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$2,000
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Direct labor hours:
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Welding
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10
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20
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Assembly
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60
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20
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Finishing
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30
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80
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Number of machine hours:
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Welding
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50
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30
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Assembly
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40
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5
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Finishing
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110
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165
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The typical bid price includes a 30 percent markup over full manufacturing cost.
Required:
1. Calculate a plantwide rate for Xanning Company based on machine hours. What is the bid price of each job using this rate?
2. Calculate departmental overhead rates for the producing departments. What is the bid price of each job using these rates? (Round all answers to the nearest dollar.)
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