Job costing, contracting, ethics. Kingston Company manufactures modular homes. The company has two main products that it sells commercially: a 1,000 square foot, one-bedroom model and a 1,500 square foot, two-bedroom model. The company recently began providing emergency housing (huts) to FEMA. The emergency housing is similar to the 1,000 square foot model. FEMA has requested Kingston to create a bid for 150 emergency huts to be sent for flood victims in the south. Your boss has asked that you prepare this bid. In preparing the bid, you find a recent invoice to FEMA for 200 huts provided after hurricane Katrina. You also have a standard cost sheet for the 1,000 square foot model sold commercially. Both are provided as follows:

Required1. Calculate the total bid if you base your calculations on the standard cost sheet assuming a cost plus 15% government contract.2. Calculate the total bid if you base your calculations on the September 15, 2005, invoice assuming a cost plus 15% government contract.3. What are the main discrepancies between the bids you calculated in #1 and #2?4. What bid should you present to your boss? What principles from the IMA Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management should guide yourdecision?

Transcribed Image Text:

Standard cost sheet: 1,000 sq. ft. one-bedroom model Direct materials Direct manufacturing labor Manufacturing overhead* $ 8,000 30 hours 600 $3 per direct labor dollar 1,800 $10,400 20% Total cost Retail markup on total cost Retail price $12,480 INVOICE: DATE: September 15, 2005 BILL TO: FEMA FOR: 200 Emergency Huts SHIP TO: New Orleans, Louisiana Direct materials Direct manufacturing labor** Manufacturing overhead $1,840,000 138,400 415,200 2,393,600 15% Total cost Government contract markup on total cost Total due $2,752,640