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Assume that a plant has two categories of overhead: material handling and quality inspection. The costs expected for these categories for the coming year are as follows Material handling Quality inspection $ 200,000 S 600,000 The plant currently applies overhead using machine hours and expected actual capacity. This figure is 80,000 machine hours. Linda Bixby, the plant manager, has been asked to submit a bid and has assembled the following data on the proposed job Potential Job $ 3,700 $ 7,000 Direct materials Direct labour (1,000 hours) Overhead Number of material moves Number of inspections Machine hours 10 900 Linda has been told that many competitors use an activity-based approach to assign overhead to jobs Before submitting her bid, she wants to assess the effects of this alternative approach. She estimates that the expected number of material moves for all jobs during the year is 1,000; she also expects 5,000 quality inspections to be performed Require 1. Compute the total cost of the potential job using machine hours to assign overhead. Assuming that the bid price is full manufacturing cost plus 25 percent, what would Linda's bid be? 2. Compute the total cost of the job using the number of material moves to allocate material handling costs and the number of inspections to allocate the quality inspection costs. Assuming a bid price of full manufacturing cost plus 25 percent, what is Linda's bid using this approach? 3. Which approach do you think best reflects the actual cost of the job? Explain