The Gilster Company, a machine tooling firm, has several plants. One plant, located in St Falls Minnesota, uses a job order costing system for its batch production processes. The St. Fall plant has two departments through which most jobs pass. Plantwide overhead, which includes the plant manager's salary, accounting personnel, cafeteria, and human resources, is budgeted at $250,000. During the past year, actual plantwide overhead was $240,000. Each department's overhead

consists primarily of depreciation and other machine-related expenses. Selected budget and actual data from the St. Falls plant for the past year are as follows

Department A Department B

Budgeted Department overhead $150,000 $600,000

(excludes plantwide overhead)

Actual Department Overhead 160,000 620,000

Expected Total activity

Direct Labor Hours 35,000 15,000

Machine hours 10,000 40,000

Actual Activity

Direct labor hours 51,000 9,000

machine hours 10,500 42,000

For the coming year, the accountants at St. Falls are in the process of helping the sales force create bids for several jobs. Projected data pertaining only to job no. 110 are as follow

Direct Materials $25,000

Direct Labor cost

Department A(2,200 hr) 45,000

Department B (800 hr) 10,000

Machine hours projected

Department A 200

Department B 1,200

Units Produced 10,000

A. Assume the St. Falls plant uses a single plantwide overhead rate to assign all overhead (plantwide and department) costs to jobs. Use expected total direct labor hours to compute the overhead rate. What is the expected cost per unit produced for job no 110.

B. Recalculate the projected manufacturing costs for job no. 110 using three separate rates: one rate for plantwide overhead and two separate department overhead rates, all based on machine-hours.

C. The sales policy at St. Falls dictates that job bids be calculated by adding 40 percent to total manufacturing costs. What would be the bid for job no. 110 using the overhead rate from part a and the overhead rate from part b. Explain why the bids differ. Which of the overhead allocation methods would you recommend and why.