roblem 5.29 Plantwide overhead Rate versus Departmental Rates, on Pricing Effects Cherise Ortega, marketing manager for Romer puzzled by the outcome of two recent bids. The company's was to bid 150 percent of the full manufacturing cost. One job policy indicated that the Job 97-28) had been turned down by a prospective customer, who had roposed price was could offer such favorable terms. This accepted by a customer, who was amazed that Romer than the next lowest bid customer revealed that Romer's price was s 43 per unit lower terms of cost Cherise has been informed that the company was more than competitive in control. Accordingly, she began to suspect that the problem was related to cost assignment pro- Cherise was told that the company uses a overhead rate based on direct labor hours. The rate is computed at the beginning of the year using budget budgeted data are given below. Department B Department A S2,500,000 S2 000.000 $500,000 Overhead 250.000 Direct labor hours 140,000 120.000 Machine hours also discovered that the overhead costs in Department B were higher than those in Department A because B has more equipment, higher maintenance, higher power consumption, higher depreciation, and higher setup costs. In addition to the general procedures for assigning overhead costs, Cherise was supplied with the following specific manufacturing data on Jobs 97-28 and 97-35: Job 97-28 Total Department A Department B 1.000 Direct labor hours Machine hours $100,000 $20,000 S120,000 Prime costs 14.400 14,400 14.400 Units produced Job 97-35 Department A Department B Direct labor hours Machine hours $10,000 Prime costs $40,000 Units produced (continued)