How do I calculate Manufacturing overheads if I do not have a DLH rate or hourly total. please see assignment attached with my proposed answers ??

Assessment: Management Accounting Product Costing ASR Group of Companies Ltd has four categories of overheads. The four categories and the expected overhead costs for each category for next year are as follows: Maintenance $150,000 Materials handling 70,000 Set-ups 60,000 Inspection 100,000 Currently, overheads are applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 60,000 direct labour hours are budgeted. The company has been asked to submit a bid for a proposed job. The factory manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 40%. Estimates for the proposed job are as follows: Direct materials $6,000 Direct labour $8,500 Number of materials moves 9 Number of inspections 7 Number of set-ups 4 Number of machine hours 400 In the past, full manufacturing cost has been calculated by allocating overheads using a volume-based cost driver - direct labour hours. Mr AR the director has heard of a new way of applying overhead that uses cost pools and cost drivers. Expected activity for the four activity-based cost drivers that would be used are as follows: Machine hours 18,000 Material moves 6,000 Set-ups 3,000 Quality inspections 9,000 www.careeracademy.co.nz 1 DHA 2015 Required: 1. Determine the amount of overheads that would be allocated to the proposed job if direct labour hours are used as the volume-based cost driver. Determine the total cost of the proposed job. Determine the company's bid if the bid is based upon full manufacturing cost plus 40%. Total Cost (Traditional approach) Direct material Direct Labour Manufacturing overheads (3596 X 6.33) Total Add 40% Bid Amount $ 6000.00 $ 8500.00 $ 22 762.68 $ 37 262.68 $ 14 905.07 $ 52 167.75 Calculation of overhead rate Overhead rate Maintenance: $ 150 000 Materials handling: $ 70 000 Set-ups: $ 60 000 Inspection: $ 100 000 Total $ 380 000 Direct Labour hour 60 000 Overhead Rate (380000/60000) 6.33 Determine the amount of overheads that would be applied to the proposed job if activitybased costing is used. Determine the total cost of the proposed job if activity-based costing is used. Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30%. www.careeracademy.co.nz 2 DHA 2015 Total Cost proposed Direct Material Direct Labour Maintenance: ($150 000/18 000*400) Materials handling: ($70 000/6 000*9) Set-ups: ($60 000/3 000*4) Inspection: ($100 000/9 000*7) $6000.00 $8500.00 $3333.33 $ 105.00 $ 80.00 $ 77.77 Total $ 18 096.10 x 30% $ 23 524.93 Overhead assigned: $8.33 * 400 $11.66 * 9 $20.00 * 4 $11.11 * 7 $ 3 333.33 $ 105.00 $ 80.00 $ 77.77 $ 3596.10 Direct Material Direct Labour Manufacturing overheads (3596 x 6.33) Total Add 30% Bid Amount 2. $ $ $ $ $ $ 6 000.00 8 500.00 22 762.68 37 262.68 11 178.80 48 441.48 Which product costing method produces the more accurate costing? Briefly explain. Activity - based costing produces more accurate cost information and more competitive bid. www.careeracademy.co.nz 3 DHA 2015