Question 5:

Jerash Manufacturing Company has presented the following budgeted costs information for the year 2020 regarding Product A:

Direct materials costs	JOD 840,000
Direct labor costs	JOD 200,000
Manufacturing overhead costs	JOD 610,000
Administrative and selling overhead costs	JOD 300,000
Production	600,000 units

Prior to 2019, the company has relied on traditional allocation base using only labor hours as a predetermined manufacturing overhead rate. Sensing that this system was distorting manufacturing overhead costs. In 2020, the company has decided to switch to an activity-based costing system using four activity cost pools to allocate manufacturing overhead costs. Information on these activity cost pools are as follows:

Activity Cost Pool	Manufacturing Overhead Cost	Total Activity
Labor Related	JOD 240,000	8,000 direct labor-hours
Machine Related	JOD 250,000	12,500 machine hours
Quality Control	JOD 120,000	8,000 Inspection hours
Others	JOD 10,000	---

Required:

1. Determine the activity rates for overhead costs the company should use in 2020. (4 Marks)
2. During 2020, the company received an offer from a regular customer to produce a customized job of 10,000 units from Product A. This job requires the following:
   • Direct materials JOD 13,788.
   • Direct labor JOD 11,212.
   • 400 Labor hours, 720 Machine hours and 100 Inspection hours.
   • JOD 1,000 of the administrative and selling overhead costs is assigned to the job.

You are required to determine the price of the job, given that the company's profit margin is 20% of the job-selling price. (4 Marks)