Dino Dog Collars uses activity-based costing. Dinos system has the following features: Each collar has four parts,

Dino Dog Collars uses activity-based costing. Dino’s system has the following features:

Each collar has four parts, direct materials cost is $ 9.00 per collar, and direct labor cost is $ 4.00 per collar. Suppose Animal Hut has asked for a bid on 25,000 dog collars. Dino will issue a total of 150 purchase orders if Animal Hut accepts Dino’s bid.

Requirements
1. Compute the total estimated cost Dino will incur to purchase the needed materials and then assemble and package 25,000 dog collars. Also compute the cost per collar.
2. For bidding, Dino adds a 40% markup to total cost. What total price will the company bid for the entire Animal Hut order?
3. Suppose that instead of an ABC system, Dino has a traditional product costing system that allocates indirect costs at the rate of $ 9.60 per direct labor hour. The dog collar order will require 12,000 direct labor hours. What total price will Dino bid using this system’s total cost?
4. Use your answers to Requirements 2 and 3 to explain how ABC can help Dino make a better decision about the bid price it will offer AnimalHut.

Transcribed Image Text:

Predetemined Overhead Allocation Rate Allocation Base Activity Purchasing Number of purchase orders Assembling Number of parts Packaging Number of finished collars 65.00 per purchase order 0.36 per part 0.25 per collar