Job bid price, direct, sequential, and reciprocal allocations (Appendix) Sherman LO 1, 2, 3, 8 Company manufactures and sells small pumps made to customer specifications. It has two service departments and two production departments. Information on March 2000 operations follows:

Separate cost driver rates are determined on the basis of machine hours for the casting department and on the basis of direct labor hours for the assembly depart¬ ment. It takes one machine hour to manufacture a pump in the casting depart¬ ment and 0.5 labor hour to assemble a pump in the assembly department. Direct labor and material costs amount to $32 per pump.
A prospective customer has requested a bid on a two-year contract to pur¬ chase 1000 pumps every month. Sherman Company has a policy of adding a 25% markup to the full manufacturing cost to determine the bid.
REQUIRED

(a) What is the bid price when the direct method is used?

(b) What is the bid price when the sequential method that begins by allocating maintenance department costs is used?

(c) What is the bid price when the reciprocal method is used?

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SERVICE DEPARTMENT PRODUCTION DEPARTMENT Item Support costs Maintenance Power Casting Assembly $750,000 $450,000 $150,000 $110,000 Machine hours 0 80,000 80,000 40,000 Kilowatt hours 40,000 0 200,000 160,000 Direct labor hours 0 0 100,000 60,000