Smoove Powder Coating-

Smoove Powder Coating applies poeder coating finishes to a variety of materials and parts used by small and medium sized manufacturing firms. Essentially powder coating involves the application of oiwder (finely divided particles of organic polymer containing pigmnets, fillers, and additives) to a surface after which the powder is fused into a continuous film by the application of heat or radiant energy. This results in a durable finish that resists rust. In prior years, finishes were applied by hand and overhead was applied to jobs on direct labor hours (the rate was $10 per hour based on budgeted overhead of $800,000 and 80,000 direct labor hours). At the start of the current year the company purchased and installed a computer-controlled, electrostatic powder coating system at a cost of $1,500,000. With a five-year life, the equipment adds $300,000 a year to overhead (thus expecting toatl overhead is now $1,100,000). However, labor has been reduced by 20,000 hours per year because the equipment reduces the need for labor, and with an average wage rate of $20 per hour, $400,000 of wages are expected to be saved in the current year. Although the company purchased the new system, it kept its old spray booth and manual equipment for use on small jobs. Smoove Powder Coating has just received an order from Evergreen Enterprises, a manufacturer of custom built outdoor furniture to powder coat 4 tables and 16 chairs. On small orders like this, Smoove uses its old manual equipment. Material costs for the job will be $400 and 6 labor hours are needed.

Require: See picture

a. Based on this limited information, estimate the full cost of the job in the current year. Assume the company used one, company-wide overhead rate. b. What would have been the full cost of the job in the prior year? C. Bill Bale, plant manager, observed that "Last year, jobs like the one we did for Evergreen cost less. But I know that we haven't become less efficient at handling small jobs. We use the same equipment, the same labor, and the same products on small jobs this year as last year and yet the accounting system is making small jobs look more expensive!" Explain to Bill why this is happening d. Does the fact that small jobs have a higher cost in the current year suggest that prices for small jobs should be increased? e. Should the company take other steps? Explain