Question
12Figure4-5 SpearManufacturinghasfourcategoriesofoverhead.Thefourcategoriesandexpectedoverheadcostsforeachcategoryfornextyearareasfollows: Maintenance $180,000 Materialshandling 27,000 Setups 24,000 Inspection 90,000 Currently,overheadisappliedusingapredeterminedoverheadratebaseduponbudgeteddirectlaborhours.20,000directlaborhoursarebudgetedfornextyear. Thecompanyhasbeenaskedtosubmitabidforaproposedjob.Theplantmanagerfeelsthatobtainingthisjobwouldresultinnewbusinessinfutureyears.Usuallybidsarebaseduponfullmanufacturingcostplus15percent.Estimatesfortheproposedjobareasfollows: Directmaterials $3,000 Directlabor(600hours) $9,000 Numberofmaterialmoves 4 Numberofinspections 6 Numberofsetups 8 Numberofmachinehours 80 Inthepast,fullmanufacturingcosthasbeencalculatedbyallocatingoverheadusingavolume-basedactivitydriver,directlaborhours.Theplantmanagerhasheardofanewwayofapplyingoverheadthatusescostpoolsandactivitydrivers.Expectedactivityforthefouractivitydriversthatwouldbeusedare:
12Figure4-5 SpearManufacturinghasfourcategoriesofoverhead.Thefourcategoriesandexpectedoverheadcostsforeachcategoryfornextyearareasfollows: Maintenance $180,000 Materialshandling 27,000 Setups 24,000 Inspection 90,000 Currently,overheadisappliedusingapredeterminedoverheadratebaseduponbudgeteddirectlaborhours.20,000directlaborhoursarebudgetedfornextyear. Thecompanyhasbeenaskedtosubmitabidforaproposedjob.Theplantmanagerfeelsthatobtainingthisjobwouldresultinnewbusinessinfutureyears.Usuallybidsarebaseduponfullmanufacturingcostplus15percent.Estimatesfortheproposedjobareasfollows: Directmaterials $3,000 Directlabor(600hours) $9,000 Numberofmaterialmoves 4 Numberofinspections 6 Numberofsetups 8 Numberofmachinehours 80 Inthepast,fullmanufacturingcosthasbeencalculatedbyallocatingoverheadusingavolume-basedactivitydriver,directlaborhours.Theplantmanagerhasheardofanewwayofapplyingoverheadthatusescostpoolsandactivitydrivers.Expectedactivityforthefouractivitydriversthatwouldbeusedare: Machinehours 5,000 Materialmoves 600 Setups 200 Qualityinspections 1,000 RefertoFigure4-5.Ifmaterialmovesareusedtoassignmaterialhandlingcosts,theamountofmaterialhandlingcostsallocatedtotheproposedjobwouldbe Selectone: a. $180. b. $170. c. $147. d. $60.
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College Accounting A Contemporary Approach
Authors: David Haddock, John Price, Michael Farina
5th Edition
126078035X, 978-1260780352
