11 of 21 GBSB GLOBAL BUSINESS SCHOOL Direct Labour Hours Machine Hours Direct Materials Direct Labour Cost: Department A (2,000 hr) Department B (500 hr) For the coming year, the accountants at St. Falls are in the process of helping the sales force create bids for several jobs. Projected data pertaining to job no. 110 are as follows: Machine Hours Projected: Department A Department B campus.gbsb.global - Private Units Produced 51,000 10,500 20,000 30,000 6,000 100 1,200 9,000 52,000 10,000 Instructions (Round overhead rates and unit costs to 2 decimal places and round other cost calculations to the nearest dollar.) Based on your previous findings in Formative Assessment 1 answer the following; a. Using the allocation rates in part b (Formative Assessment 1), compute the under- or overapplied overhead for the St. Falls plant for the year. Explain the impact on net income of assigning the under- or overapplied overhead to cost of goods sold rather than prorating the amount between inventories and cost of goods sold. (20 marks) b. A St. Falls subcontractor has offered to produce the parts for job no. 110 for a price of $8 per unit. Assume the St. Falls sales force has already committed to the bid price based on the calculations in part b. Explain if St. Falls buy the $8 per unit part from the subcontractor or continue to make the parts for job no. 110 itself? (40 marks) c. Would your response to part b change if the St. Falls plant could use the facilities necessary to produce parts for job no. 110 for another job that could earn an incremental profit of $15,000? (40 marks) Total expected word count; 500-750 (Total 100 marks) 4.1.3 Set Exercise 3

For the coming year, the accountants at St. Falls are in the process of helping the sales force create bids for several jobs. Projected data pertaining to job no. 110 are as follows: Instructions (Round overhead rates and unit costs to 2 decimal places and round other cost calculations to the nearest dollar.) Based on your previous findings in Formative Assessment 1 answer the following: a. Using the allocation rates in part b (Formative Assessment 1), compute the under- or overapplied overhead for the St. Falls plant for the year. Explain the impact on net income of assigning the under-or overapplied overhead to cost of goods sold rather than prorating the amount between inventories and cost of goods sold. (20 marks) b. A St. Falls subcontractor has offered to produce the parts for job no. 110 for a price of $8 per unit. Assume the St. Falls sales force has already committed to the bid price based on the calculations in part b. Explain if St. Falls buy the $8 per unit part from the subcontractor or continue to make the parts for job no. 110 itself? (40 marks) c. Would your response to part b change if the St. Falls plant could use the facilities necessary to produce parts for job no. 110 for another job that could earn an incremental profit of $15,000 ? (40 marks) Total expected word count; 500-750 (Total 100 marks) 4.1.3 Set Exercise 3 For the coming year, the accountants at St. Falls are in the process of helping the sales force create bids for several jobs. Projected data pertaining to job no. 110 are as follows: Instructions (Round overhead rates and unit costs to 2 decimal places and round other cost calculations to the nearest dollar.) Based on your previous findings in Formative Assessment 1 answer the following: a. Using the allocation rates in part b (Formative Assessment 1), compute the under- or overapplied overhead for the St. Falls plant for the year. Explain the impact on net income of assigning the under-or overapplied overhead to cost of goods sold rather than prorating the amount between inventories and cost of goods sold. (20 marks) b. A St. Falls subcontractor has offered to produce the parts for job no. 110 for a price of $8 per unit. Assume the St. Falls sales force has already committed to the bid price based on the calculations in part b. Explain if St. Falls buy the $8 per unit part from the subcontractor or continue to make the parts for job no. 110 itself? (40 marks) c. Would your response to part b change if the St. Falls plant could use the facilities necessary to produce parts for job no. 110 for another job that could earn an incremental profit of $15,000 ? (40 marks) Total expected word count; 500-750 (Total 100 marks) 4.1.3 Set Exercise 3