Kare Foods Company specializes in the production of frozen dinners. The first of the two operating departments cooks the food. The second is responsible for packaging and freez¬

ing the dinners. The dinners are sold by the case, each case containing 25 dinners.

Two support departments provide support for Kare's operating units: Maintenance and Power. Budgeted data for the coming quarter are given below. The company does not sep¬

arate fixed and variable costs.

The predetermined overhead rate for Cooking is computed on the basis of machine hours; direct labor hours are used for Packaging and Freezing. The prime costs for one case of standard dinners total $16. It takes 2 machine hours to produce a case of dinners in the Cooking Department and 0.5 direct labor hour to process a case of standard dinners in the Packaging and Freezing Department.
Recently, the Air Force has requested a bid on a three-year contract that would supply standard frozen dinners to Minuteman missile officers and staff on duty in the field. The lo¬
cations of the missile sites were remote, and the Air Force had decided that frozen dinners were the most economical means of supplying food to personnel on duty.
The bidding policy of Kare Foods is full manufacturing cost plus 20%. Assume that the lowest bid of other competitors is $48.80 per case.
Required:
1. Prepare bids for Kare Foods using each of the following allocation methods:

a. Direct method

b. Sequential method

c. Reciprocal method 2. Refer to Requirement 1. Did all three methods produce winning bids? If not, explain why. Which method most accurately reflects the cost of producing the cases of dinners?
Why?

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Support Departments Producing Departments Packaging and Freezing Maintenance Power Cooking Overhead costs $340,000 $200,000 $ 75,000 $55,000 Machine hours 40,000 40,000 20,000 Kilowatt-hours 20,000 100,000 80,000 Direct labor hours 5,000 30,000