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Lawson Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows: Maintenance
Lawson Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows: Maintenance Materials handling Setups Inspection $180,000 27,000 24,000 90,000 Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours. 20,000 direct labor hours are budgeted for next year. The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually, bids are based upon full manufacturing cost plus 15%. Estimates for the proposed job are as follows: Direct materials Direct labor (600 hours) Number of material moves Number of inspections Number of setups Number of machine hours $3,000 $9,000 4 6 8 80 90 In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based activity driver, direct labor hours. The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers. Expected activity for the four activity drivers that would be used are as follows: Machine hours: Material moves Setups Quality inspections 5,000 600 200 1,000 f material moves are used to assign material handling costs, the amount of materials handling costs allocated to the proposed job would be A $60. B $147. $170. $180.
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