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Help!! Marine Components produces parts for airplanes and ships. The parts are produced to specification by their customers who pay either a fixed price (the
Help!!
Marine Components produces parts for airplanes and ships. The parts are produced to specification by their customers who pay either a fixed price (the price does not depend directly on the cost of the job) or price equal to recorded cost plus a fixed fee (cost plus). For the upcoming year (year 2), Marine expects only two clients (client 1 and client 2) The work done for client will all be done under fixed price contracts while the work done for client 2 will all be done under cost-plus contracts The controller at Marine Components chose direct labor cost as the allocation base in year 2 based on what she considered reflected the relation between overhead and direct labor cost. Year 3 is approaching and again the company only expects two clients client 1 and client 3. Work for client will continue to be billed using fixed price contracts, and client will be bitted based on cost-plus contracts Manufacturing overhead for year 3 is estimated to be $18 million Other budgeted data for year 3 include Machine hours (thousands) Direct labor cost (5000) client 4.300 53,000 chent 7.200 $3,000 Required: a. Compute the predetermined rate assuming that Marne Components uses machine hours to apply overhead b. Compute the predetermined rate assuming that Marine Components uses direct labor cost to apply overhead, Required A Required B ces Compute the predetermined rate assuming that Marine Components uses machine hours to apply over answer to 2 decimal places.) Application rate per machine hour Required B > Required A Required B Compute the predetermined rate assuming that Marine Components uses direct labor cost to apply overhead. Application rate % of direct labor cost
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