QUESTION 8: Product costing [20 marks]

The Brunswick Bike Company, manufactures custom made mountain bikes. It uses an estimated rate for allocating factory overhead to job orders based on machine hours for the machining department and on a direct labour cost basis for the finishing department. The company budgeted the following for last year:

	Machining	Finishing
Manufacturing overhead	$8,000,000	$5,000,000
Machine hours	250,000	14,000
Direct labour hours	15,000	16,000
Direct labour cost	$225,000	$2,400,000

During December, the cost record for job 602 shows the following:

	Machining	Finishing
Direct material requisitioned	$7,000	$2,000
Direct labour cost	$300	$6,750
Direct labour hours	20	300
Machine hours	35	5

Required:

1. What is the estimated overhead allocation rate that should be used in the machining department? In the finishing department? [5 marks]

2. What is the total overhead allocated to job 602? Provide your answer to 2 decimal points. [5 marks]

3. Assuming that job 602 consisted of 80 units (80 bikes), what is the unit cost for this job to the nearest dollar? [10 marks]