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ASSIGNMENT 2 DETAILS Part A: Group Submission Case Study: ELO Ltd ELO Ltd manufactures iron fences for commercial organisations. Each fence is manufactured to individual
ASSIGNMENT 2 DETAILS Part A: Group Submission Case Study: ELO Ltd ELO Ltd manufactures iron fences for commercial organisations. Each fence is manufactured to individual customers' specifications. ELO Ltd uses the tender process to obtain work, where the company responds to an invitation to submit a competitive bid. Over the last few months, business at ELO Ltd has been very quiet, and the managing director is concerned that the business will fail if it does not improve its success rate with tenders. The company has two production departments, Bending and Welding, and the production requirements for individual jobs can differ significantly. Some jobs require extensive bending with little welding; others require litile bending with a lot of welding. The following table describes the results of the five bids that the company submitted last month. The numbers in brackets after losses indicate where the company ranked in the bid process: Job Direct labour Direct labour Estimated Overhead hours in hours in direct labour cost of bid Won/lost Bending Welding hours The pattern of resource usage implied in the above table has persisted for several months. The company uses a pre-determined plant-wide overhead rate based on practical capacity, which is measured in direct labour hours. The budgeted overhead for the year: e Bending Department is $108,000 (including $36,000 fixed and $72,000 variable) Welding Department it is $288,000 (including $72,000 fixed and $216,000 variable). Each department has a monthly practical capacity of 6,000 direct labour hours. Question 1: Cost Allocation [Total: 20 marks] Required: Refer to Part A ELO Ltd Case Study and answer the following: Discuss an alternative bidding scheme that overcomes the current overhead allocation situation facing the firm, by proposing an alternative method of allocating manufacturing overheads. Support your analysis with calculations by showing the overheads cost bid for each job applying your alternative method. Your discussion part has a word limit of 150 words (excluding the calculations). (10 marks) Explain how this alternative bidding scheme may improve its success rate with tenders. Your explanation should consider the qualitative factors. Your discussion has a word limit of 300 words. (10 marks)
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