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Overhead Application, Activity-Based Costing, Bid Prices Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is: Purchasing Setups $35,000
Overhead Application, Activity-Based Costing, Bid Prices Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is: Purchasing Setups $35,000 35,000 Engineering Other 45,000 40,000 Previously, Sanjay Bhatt, Firenza Company's controller, had applied overhead on the basis of machine hours. Expected machine hours for the coming year are 50,000. Sanjay has been reading about activity-based costing, and he wonders whether or not it might offer some advantages to his company. He decided that appropriate drivers for overhead activities are purchase orders for purchasing, number of setups for setup cost, engineering hours for engineering cost, and machine hours for other. Budgeted amounts for these drivers are 5,000 purchase orders, 500 setups, and 2,500 engineering hours. Sanjay has been asked to prepare bids for two jobs with the following information: Job 1 Job 2 Direct materials $4,600 $9,380 Direct labor $1,200 $2,100 Number of purchase orders 15 20 Number of setups 3 4 Number of engineering hours 45 10 Number of machine hours 200 200 The typical bid price includes a 40 percent markup over full manufacturing cost.
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