Comprehensive Problem $5($Algo$)$

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The Gilster Company, a machine tooling firm, has several plants. One plant, located in St$.$ Cloud, Minnesota, uses a job order costing system for its batch production processes. The St$.$ Cloud plant has two departments through which most jobs pass. Plant$-$wide overhead, which includes the plant manager$$s salary, accounting personnel, cafeteria, and human resources, is budgeted at $$300,000.$ During the past year, actual plantwide overhead was $$244,000.$ Each department$$s overhead consists primarily of depreciation and other machine$-$related expenses. Selected budgeted and actual data from the St$.$ Cloud plant for the past year are as follows.

Department A Department B

Budgeted department overhead

$($excludes plantwide overhead$)$ $ $109,200$ $ $567,000$

Actual department overhead $132,000585,000$

Expected total activity:

Direct labor hours $58,00015,000$

Machine$-$hours $14,00054,000$

Actual activity:

Direct labor hours $60,00014,000$

Machine$-$hours $14,70056,000$

For the coming year, the accountants at the St$.$ Cloud plant are in the process of helping the sales force create bids for several jobs. Projected data pertaining only to job no$.110$ are as follows.

Direct materials $ $22,000$

Direct labor cost:

Department A $(2,600$ hr$)39,000$

Department B $(800$ hr$)12,400$

Machine$-$hours projected:

Department A $110$

Department B $1,200$

Units produced $13,000$

Comprehensive Problem $5($Algo$)$ Part a

Required:

a$-1.$ Assume the St$.$ Cloud plant uses a single plantwide overhead rate to assign all overhead $($plantwide and department$)$ costs to jobs. Use expected total direct labor hours to compute the overhead rate.

a$-2.$ What is the expected cost per unit produced for job no$.110?$ b$-1.$ Find the plant wide overhead rate by using expected machine hours.

b$-2.$ Find the department overhead rate using expected machine hours for Department A and Department B$.$

b$-3.$ Calculate the projected manufacturing costs per unit for job $110$ using the three separate rates computed in b$-1$ and b$-2.$ c$-1.$ The sales policy at the St$.$ Cloud plant dictates that job bids be calculated by adding $24$ percent to total manufacturing costs. What would be the bid for job no$.110$ using the overhead rate from part a$?$

c$-2.$ The sales policy at the St$.$ Cloud plant dictates that job bids be calculated by adding $24$ percent to total manufacturing costs. What would be the bid for job no$.110$ using the overhead rate from part b$?$

c$-3.$ Which of the overhead allocation methods would you recommend? d$.$ Compute the under$-$ or overapplied overhead for the St$.$ Cloud plant for the year e$.$ A St$.$ Cloud subcontractor has offered to produce the parts for job no$.110$ for a price of $$8$ per unit. Assume the St$.$ Cloud sales force has already committed to the bid price based on the calculations in part b$.$ Should the St$.$ Cloud plant buy the $$8$ per unit part from the subcontractor or continue to make the parts for job no$.110$ itself?

multiple cho ice

Buy part from the subcontractor

Continue to make the part