GAM Ltd.'s budgeted fixed production overhead cost for the year totals

$200000

and is absorbed into its project costs using a skilled direct labour hour absorption rate, based on normal operating capacity of

80%

. GAM Ltd.'s capacity budget for the year is a total of 50000 skilled direct labour hours. GAM Ltd.'s latest annual forecast is for overhead costs to total

$220000

, and for capacity to be as originally budgeted.\ Recuireds\ Mr. Craig Balis has heard thaff for special orders such as this, relevant costing should be used. As the assistant Management Accountant of the GA Group, you are to:\ Explain how the junior accountant arrived at the estimates shown in the schedule (use template below) (10.5 marks)\ Discuss whether or not you agree with the estimates using your knowledge of relevant cost analysis (use template below) (13.5 marks)\ Indicate the relevant cost for each item and the total relevant cost (use template) (10 marks)\ If the policy of the company is to apply a

12%

mark-up, what price should GAM Ltd quote? (1 mark)

8) GAM Ltd.'s budgeted fixed production overhead cost for the year totals $200000 and is absorbed into its project costs using a skilled direct labour hour absorption rate, based on normal operating capacity of 80%. GAM Ltd.'s capacity budget for the year is a total of 50000 skilled direct labour hours. GAM Ltd.'s latest annual forecast is for overhead costs to total $220000, and for capacity to be as originally budgeted. Required: Mr. Craig Balis has heard thafffor special orders such as this, relevant costing should be used. As the assistant Management Accountant of the GA Group, you are to: 1. Explain how the junior accountant arrived at the estimates shown in the schedule (use template below) (10.5 marks) 2. Discuss whether or not you agree with the estimates using your knowledge of relevant cost analysis (use template below) (13.5 marks) 3. Indicate the relevant cost for each item and the total relevant cost (use template) (10 marks) 4. If the policy of the company is to apply a 12% mark-up, what price should GAM Ltd quote? (1 mark)