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Mantwide Rate and Activity Based Costing: Bid Price of job Potter Manufacturing Inc. has four categories of overhand. The expected overhead costs for each of
Mantwide Rate and Activity Based Costing: Bid Price of job Potter Manufacturing Inc. has four categories of overhand. The expected overhead costs for each of the categories for the next year are as follow Costs $120,000 Expected Activity 5,000 600 Maintenance Materials handling Setups Inspection Cost Driver Machine hours Material moves Setups Inspection 18,000 16,000 60,000 200 1,000 Currently, the company applies overhead using a predetermined overhead rate based on budgeted direct labour hours of 20,000. The company has been asked to bid on a proposed job Usually bids are based on full manufacturing costs plus a markup of 35 percent. Estimates for the proposed job are as follows: $2.000 $6,000 600 Direct materials Direct labour Number of direct labour hours Number of material moves Number of inspections Number of setups Number of machine hours 80 Required: Setups 16,000 200 Setups Inspection Inspection 60,000 1,000 Currently, the company applies overhead using a predetermined overhead rate based on budgeted direct labour hours of 20 Usually bids are based on full manufacturing costs plus a markup of 35 percent. Estimates for the proposed job are as follows Direct materials $2,000 Direct labour $6,000 600 Number of direct labour hours Number of material moves Number of inspections Number of setups Number of machine hours 6 > 8 80 Required: 1. If the company used direct labour hours as the cost driver, calculate the bid price of the proposed job. s 2. If the company used activity-based cost drivers to assign overhead, calculate the bid price of the proposed job. s 14 Type here to search c C
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