{ "key_pair_value_system": true, "answer_rating_count": "", "question_feedback_html": { "html_star": "", "html_star_feedback": "" }, "answer_average_rating_value": "", "answer_date_js": "2024-06-28T05:36:44-04:00", "answer_date": "2024-06-28 05:36:44", "is_docs_available": null, "is_excel_available": null, "is_pdf_available": null, "count_file_available": 0, "main_page": "student_question_view", "question_id": "4246515", "url": "\/study-help\/questions\/salvo-inc-a-specialized-equipment-manufacturer-uses-a-job-order-4246515", "question_creation_date_js": "2024-06-28T05:36:44-04:00", "question_creation_date": "Jun 28, 2024 05:36 AM", "meta_title": "[Solved] Salvo Inc., a specialized equipment manuf | SolutionInn", "meta_description": "Answer of - Salvo Inc., a specialized equipment manufacturer, uses a job order costing system. The overhead is allocated to jobs o | SolutionInn", "meta_keywords": "salvo,inc.,specialized,equipment,manufacturer,job,order,costing,system,overhead,allocated,jobs", "question_title_h1": "Salvo Inc., a specialized equipment manufacturer, uses a job order costing system. The overhead is allocated to jobs on the basis of direct labor hours.", "question_title": "Salvo Inc., a specialized equipment manufacturer, uses a job order costing system.", "question_title_for_js_snippet": "Salvo Inc , a specialized equipment manufacturer, uses a job order costing system The overhead is allocated to jobs on the basis of direct labor hours The overhead rate is now $1,500 per direct labor hour The design engineer thinks that this is illogical The design engineer has stated the following Our accounting system doesn't make any sense to me It tells me that every labor hour carries an additional burden of $1,500 This means that direct labor makes up only 6 of our total product cost, yet it drives all our costs In addition, these rates give my design engineers incentives to design out direct labor by using machine technology Yet, over the past years as we have had less and less direct labor, the overhead rate keeps going up and up I won't be surprised if next year the rate is $2,000 per direct labor hours I'm also concerned because small errors in our estimates of the direct labor content can have a large impact on our estimated costs Just a 30 minute error in our estimate of assembly time is worth $750 Small mistakes in our direct labor time estimates really swing our bids around I think this puts us at a disadvantage when we are going after business What is the engineer's concern about the overhead going up and up What did the engineer mean about the large overhead rate being a disadvantage when placing bids and seeking new business What do you think is a possible solution ", "question_description": "

Salvo Inc., a specialized equipment manufacturer, uses a job order costing system. The overhead is allocated to jobs on the basis of direct labor hours. The overhead rate is now $1,500 per direct labor hour. The design engineer thinks that this is illogical. The design engineer has stated the following:<\/p>

Our accounting system doesn't make any sense to me. It tells me that every labor hour carries an additional burden of $1,500. This means that direct labor makes up only 6% of our total product cost, yet it drives all our costs. In addition, these rates give my design engineers incentives to \"design out\" direct labor by using machine technology. Yet, over the past years as we have had less and less direct labor, the overhead rate keeps going up and up. I won't be surprised if next year the rate is $2,000 per direct labor hours. I'm also concerned because small errors in our estimates of the direct labor content can have a large impact on our estimated costs. Just a 30-minute error in our estimate of assembly time is worth $750. Small mistakes in our direct labor time estimates really swing our bids around. I think this puts us at a disadvantage when we are going after business.<\/em><\/p>

<\/p>

  1. What is the engineer's concern about the overhead going \"up and up?\"<\/li>
  2. What did the engineer mean about the large overhead rate being a disadvantage when placing bids and seeking new business?<\/li>
  3. What do you think is a possible solution?<\/li> <\/ol>", "transcribed_text": "", "related_book": { "title": "Entrepreneurial Finance", "isbn": "1305968352, 978-1337635653, 978-1305968356", "edition": "6th edition", "authors": "J. Chris Leach, Ronald W. Melicher", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/1482.jpg", "uri": "\/textbooks\/entrepreneurial-finance-6th-edition-1482", "see_more_uri": "" }, "free_related_book": { "isbn": "1534632751", "uri": "\/textbooks\/how-to-start-a-new-moving-company-a-step-by-step-guide-on-how-to-start-a-new-moving-company-1st-edition-978-1534632752-270128", "name": "How To Start A New Moving Company A Step By Step Guide On How To Start A New Moving Company", "edition": "1st Edition" }, "question_posted": "2024-06-28 05:36:44", "see_more_questions_link": "\/study-help\/questions\/business-banking-2021-September-12", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/what-is-sensitivity-analysis-and-how-can-it-be-useful", "description": "What is sensitivity analysis, and how can it be useful to a decision maker?", "stars": 3 }, { "url": "\/study-help\/biostatistics\/determine-the-cost-of-sampling-for-each-of-the-scenarios-1981058", "description": "Determine the cost of sampling for each of the scenarios in Exercise 6.23 when the initial cost of sampling is ????0 = $1250 and the cost of sampling per unit sampled is ???? = $2.50.", "stars": 3 }, { "url": "\/red-hat-inc-reported-comprehensive-income-from-2008-to-2010", "description": "Red Hat, Inc. reported comprehensive income from 2008 to 2010 as follows ($ thousands): Required: A. Assuming that Red Hat has not purchased or sold any available-for-sale securities, what has...", "stars": 3 }, { "url": "\/study-help\/questions\/points-you-are-working-as-accountant-at-batelco-company-and-9853940", "description": "points You are working as accountant at Batelco Company, and you are asked to use the time-based model to evaluate and improve the security of the company's system. The following data were available:...", "stars": 3 }, { "url": "\/study-help\/questions\/how-has-the-interpretation-of-the-first-amendment-evolved-over-508034", "description": "How has the interpretation of the First Amendment evolved over time, and what impact has it had on the protection of free speech in the United States?", "stars": 3 }, { "url": "\/study-help\/questions\/dry-cleaning-is-a-5-billion-industry-primarily-because-the-1003792", "description": "Dry cleaning is a $5 billion industry primarily because the natural fabrics popular today, such as wool and linen, require professional cleaning. For more than five decades, customers have known and...", "stars": 3 }, { "url": "\/study-help\/questions\/why-is-python-considered-a-good-language-for-beginners-in-999013", "description": "Why is Python considered a good language for beginners in programming and software testing? Python's complex syntax is a good challenge for beginners. Python has limited resources and libraries,...", "stars": 3 }, { "url": "\/study-help\/questions\/adams-furniture-receives-a-special-order-for-10-sofas-for-1005172", "description": "Suppose a firm has a production function given by Q = LK, w = 16, r = 25 a) Find the firm's total cost function and marginal cost, assuming that there are no fixed costs. b) Does the firm exhibit...", "stars": 3 }, { "url": "\/study-help\/questions\/corporate-cultures-vary-considerably-both-within-and-across-national-borders-1002635", "description": "Corporate cultures vary considerably, both within and across national borders. Why should global managers care about such variations, so long as they know the specific individuals within a company...", "stars": 3 }, { "url": "\/study-help\/questions\/question-1-2-points-for-the-following-file-type-extensions-999901", "description": "Question #1 (2 points) For the following file type extensions provide a brief description of its purpose and what it is used for. Example: .bmp short for: bitmap used for: graphics, Microsoft...", "stars": 3 } ], "next_back_navigation": { "previous": "\/study-help\/questions\/these-items-are-taken-from-the-financial-statements-of-swifty-4246514", "next": "\/study-help\/questions\/a-company-has-different-output-levels-and-incurs-different-total-4246516" }, "breadcrumbs": [ { "name": "Study help", "link": "https:\/\/www.solutioninn.com\/study-help\/questions-and-answers" }, { "name": "Business", "link": "https:\/\/www.solutioninn.com\/study-help\/questions-and-answers\/business" }, { "name": "Accounting", "link": "https:\/\/www.solutioninn.com\/study-help\/questions\/business-accounting" }, { "name": "Salvo Inc., a specialized equipment manufacturer, uses a job order costing system.", "link": "https:\/\/www.solutioninn.com\/study-help\/questions\/salvo-inc-a-specialized-equipment-manufacturer-uses-a-job-order-4246515" } ], "skill_details": { "skill_id": "9", "skill_name": "Accounting", "parent_id": "1" } }d": "1" } }