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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

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. Falls plant has two departments through which most jobs pass. Plantwide overhead, which includes the plant managers salary, accounting personnel, cafeteria, and human resources, is budgeted at $250,000. During the past year, actual plantwide overhead was $240,000. Each departments overhead consists primarily of depreciation and other machine-related expenses. Selected budgeted and actual data from the St. Falls plant for the past year are as follows.

Department A Department B
Budgeted department overhead
(excludes plantwide overhead) $ 150,000 $ 600,000
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 follows.

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

f. Would your response to part e change if the St. Falls plant could use the facilities necessary to produce parts for job no. 110 for another job that could earn an incremental profit of $20,000?

Yes

or

No

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