Oxford Manufacturing Corp. has four categories of overhead costs. The expected total overhead costs for each category for $2023$ are as follows:

Repairs and maintenance $($R&M$)$

$$210,000$

Materials handling

$$90,000$

Setups

$$75,000$

Inspection

$$150,000$

The company has been asked to submit a bid for a proposed job for Cambridge Corp. The plant manager believes that obtaining this job would result in new business in future years. Bids are usually based upon full manufacturing cost plus $30$ percent. $($This is the proposed revenue from the contract if accepted.$)$ Estimated costs and relevant activities for the proposed job are as follows:

Direct materials

$$5,000$

Direct labor $(375$ hours$)$

$$7,500$

Number of materials moves

$4$

Number of inspections

$3$

Number of setups

$2$

R&M machine$-$hours

$150$

Estimated total company$-$wide activity for $2023$ for the four activity$-$based cost drivers that would be used is below:

Machine$-$hours for $$R&M$$

$10,000$

Moves in handling materials

$2,000$

Number of setups

$100$

Number of quality inspections

$4,000$

Required:

Determine the overhead rate if the company uses the traditional, single plant$-$wide rate approach if $20,000$ direct labor$-$hours is used as the volume$-$based cost driver.

Determine the amount of overhead that would be applied to the proposed Fender project if activity$-$based costing applying the four cost drivers is used.

Determine the total costs of the proposed job if each of the alternatives in parts a$)$ and b$)$ are used.

Briefly explain the logic behind using activity$-$based costing instead of the traditional single plant$-$wide rate approach.

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