Job cost sheet, markup> single rate versus departmental rates Duluth Metal¬

works Company has two departments, milling and assembly. The company uses a job costing system that employs a single, plant-wide support cost driver rate to apply support costs to jobs on the basis of direct labor hours. That is, the plant-

150 Chapter 4 wide cost driver rate is computed by dividing plant-wide support costs by total plant-wide direct labor hours. The following estimates are for May 2000:

The following information pertains to job 691, which was started and com¬ pleted during May 2000:

(a) Prepare a job cost sheet for job 691.

(b) Assume next that instead of using a single, plant-wide support cost driver rate, the company uses machine hours and direct labor hours as cost drivers for the application of support costs in the milling and assembly departments, respec¬ tively. Prepare a job cost sheet for job 691.

(c) Using the costs you computed in parts

(a) and (b), determine the bid price that Duluth Metalworks will quote if it uses a 25% markup on total manufacturing cost.

(d) Provide reasons why Duluth Metalworks might prefer the method in

(a) or in (b).

Transcribed Image Text:

MILLING ASSEMBLY Support costs Direct labor hours. $120,000 $160,000 8,000 12,000 Machine hours 12,000 6,000