1. Firm XYZ has a Seat Manufacturing Department that uses ABC. XYZs activity cost allocation rates include the following:

Activity	Allocation Base	Activity Cost Allocation Rate
Machining	Number of machine hours	$30 per machine hour
Assembling	Number of parts	$0.50 per part
Packaging	Number of finished seats	$0.90 per finished part

Suppose a car manufacturing firm ABC asked for a bid on 50,000 build-in baby seats that would be installed as an option on some SUVs. Each seat has 20 parts and the direct materials cost per seat is $11. The job would require 10,000 direct labor hours at a labor wage rate of $25 per hour. In addition, firm XYZ will use a total of 400 machine hours to fabricate some of the parts required for the seats.

Requirements:

1. Compute the total cost of producing and packaging 50,000 baby seats. Also compute the average cost per seat.
2. For bidding, firm XYZ adds a 30% markup to total cost. What price will the company bid for the car manufacturing firm order?
3. Suppose that instead of an ABC system, firm XYZ has a traditional product costing system that allocates manufacturing overhead at a plantwide rate of $65 per direct labor hour. The baby seat order will require 10,000 direct labor hours. Compute the total cost of producing the baby seats and the average cost per seat. What price will firm XYZ bid using this systems total cost?
4. Use your answers to Requirements 2 and 3 to explain how firm XYZ can help car manufacturing firm ABC make a better decision about the bid price it will offer manufacturing firm ABC.