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Don't tell me we've lost another bid exclaimed Janice Hudson, president of Prime Products Inc. l'm afraid so, replied Doug Martin, the operations vice-president. One
Don't tell me we've lost another bid" exclaimed Janice Hudson, president of Prime Products Inc. "l'm afraid so," replied Doug Martin, the operations vice-president. "One of our competitors underbid us by about $14,000 on the Hastings job." "I just can't figure it out," said Hudson. "It seems we're either too high to get the job or too low to make any money on half the jobs we bid. What's happened?" Prime Products manufactures specialized goods to customers' specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labour cost. The following estimates were made at the beginning of the year: Department Cutting Machining Assembly Direct labour Manufacturing overhead Total Plant $325,500 $217,000 $434,000 $ 976,500 $585,900 $868,000 $108,500 $1,562,400 Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufacturing costs in the three departments as follows Department Direct material Direct labour Manufacturing overhead Cutting $25,600 $15,000 Machining Assembly Total Plant $9,000 $23,200 $2,600 $5,100 $37,200 $43,300 The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs Required 1. Assuming the use of a plantwide overhead rate a. Compute the rate for the current year Predetermined overhead rate
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