Recycling recycles? newsprint, cardboard, and so? forth, into recycled packaging materials. For the coming? year,

ColwellColwell

estimates total manufacturing overhead to be

$ 370 comma 000$370,000.

The? company's managers are not sure if direct labor hours? (estimated to be

10 comma 00010,000?)

or machine hours? (estimated to be

14 comma 80014,800

?hours) is the best allocation base to use for allocating manufacturing overhead.

ColwellColwell

bids for jobs using a

2929?%

markup over total manufacturing cost.

After the new fiscal year? began,

Hollings Paper SupplyHollings Paper Supply

asked

ColwellColwell

Recycling to bid for a job that will take

1 comma 9751,975

machine hours and

1 comma 5001,500

direct labor hours to produce. The direct labor cost for this job will be

$ 12$12

per? hour, and the direct materials will total

$ 25 comma 100.$25,100.??

Read the

requirements

LOADING...

.

Requirement 1. Compute the total job cost and bid price if

ColwellColwell

Recycling decided to use direct labor hours as the manufacturing overhead allocation base for the year.

First calculate the predetermined overhead rate based on direct labor hours. Identify the formula and then compute the rate.

Estimated yearly overhead costs

/

Estimated yearly direct labor hours

=

Predetermined overhead rate

370,000

/

10,000

=

per hour

Next we will calculate the total job cost.

		Job Sheet
	Direct materials	25100
	Direct labor	18000
	Manufacturing overhead	55,500
	Total job cost

Compute the bid price if

ColwellColwell

decided to use direct labor hours as the manufacturing overhead allocation base for the year. ?(Round all amounts to the nearest whole? dollar.)

Manufacturing overhead	+	Markup for profit	=	Bid price
98600	+	28594	=

Requirement 2. Compute the total job cost and bid price if

ColwellColwell

Recycling decided to use machine hours as the manufacturing overhead allocation base for the year.

Calculate the predetermined overhead rate based on machine hours. Identify the formula and then compute the rate.

Estimated yearly overhead costs

/

Estimated yearly machine hours

=

Predetermined overhead rate

/

=

per hour

Next we will calculate the total job cost.

		Job Sheet
	Total job cost

Compute the bid price if

ColwellColwell

decided to use machine hours as the manufacturing overhead allocation base for the year. ?(Round all amounts to the nearest whole? dollar.)

	+		=	Bid price
	+		=

Requirement 3. In addition to the bid from

ColwellColwell

?Recycling,

Hollings Paper SupplyHollings Paper Supply

received a bid of

$ 126 comma 500$126,500

for this job from

Cusack RecyclingCusack Recycling.

What are the ramifications for

ColwellColwell

?Recycling?

Whether or not Colwell wins the bid will depend on the allocation base the company chose to use during the year. Colwell's
bid price will be $		if the company uses direct labor hours as the allocation base. In this case, the company
will probably		the job to Cusack Recycling, since its bid was $			However, Colwell
will probably		the bid if machine hours is used as the allocation base. Using machine hours as an allocation
base results in a bid price of $			.