One plant, located in St. Falls, Minnesota, uses a job order costing system for its batch production processes. The St. Falls plant has two departments through which most jobs pass. Plantwide overhead, which includes the plant managers salary, accounting personnel, cafeteria, and human resources, is budgeted at $200,000. During the past year, actual plantwide overhead was $190,000. Each departments overhead consists primarily of depreciation and other machine-related expenses.

	DeptA	DeptB
Budgeted Dept Overhead (excludes plantwide overhead)	100,000	500,000
Actual Dept Overhead	110,000	520,000
Expected Activity: Direct Labor Hours Machine Hours	50,000	10,000
	10,000	50,000
Actual Activity: Direct Labor Hours Machine Hours	51,000	9,000
	10,500	52,000

For the coming year, the accountants at St. Falls are in the process of helping the sales force create bids for several jobs. Projected data pertaining to job no. 110 are as follows:

Direct Materials	20,000
Direct Labor Cost: DeptA (2,000 hr) DeptB (500 hr)	30,000 6,000
Machine Hours Projected: DeptA Dept B	100 1,200
Units Produced	10,000

Round 2 decimal places and to the nearest dollar.

d. Using the allocation rates in part b, compute the under- or overapplied overhead for the St. Falls plant for the year. Explain the impact on net income of assigning the under- or overapplied overhead to cost of goods sold rather than prorating the amount between inventories and cost of goods sold.

e. A St. Falls subcontractor has offered to produce the parts for job no. 110 for a price of $8 per unit. Assume the St. Falls sales force has already committed to the bid price based on the calculations in part b. Should St. Falls buy the $8 per unit part from the subcontractor or continue to make the parts for job no. 110 itself?

f. Would your response to part e change if the St. Falls plant could use the facilities necessary to produce parts for job no. 110 for another job that could earn an incremental profit of $15,000?