Potter Manufacturing Inc. has four categories of overhead. The expected overhead costs for each of the categories for the next year are as follows:

Currently, the company applies overhead using a predetermined overhead rate based on budgeted direct labour hours of 20,000. The company has been asked to bid on a proposed job. Usually bids are based on full manufacturing costs plus a markup of 35 percent. Estimates for the proposed job are as follows:
Direct materials.............................$2,000
Direct labour.................................$6,000
Number of direct labour hours...............600
Number of material moves.......................4
Number of inspections...........................6
Number of setups.................................8
Number of machine hours......................80
Required:
1. If the company used direct labour hours as the cost driver, calculate the bid price of the proposed job.
2. If the company used activity-based cost drivers to assign overhead, calculate the bid price of the proposed job.

Transcribed Image Text:

Expected Activity Cost Driver Costs Machine hours Material moves 5,000 600 200 1,000 Maintenance Materials handling $120,000 Setups Inspection Setups 60,000 Inspections