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Ross manufacturing produces machine parts on a job order basis. Ross gets orders after winning bidding. The bidding price is based on full cost with
Ross manufacturing produces machine parts on a job order basis. Ross gets orders after winning bidding. The bidding price is based on full cost with a 20% markup. This company has two service departments, A and B, and two production departments, C and D. The following table provides departmental information. Service Departments Production Departments A B C D Direct Costs $100,000 (total $200,000 (total $200,000 operating) operating) (overhead) $150,000 (overhead) 8 35 45 Number of Employees 2000 200 6400 2600 Maintenance Hours Machine Hours 10,000 1,000 Labor Hours 1,000 10,000 Department A uses number of employees and Department B uses maintenance hours to allocate direct costs. Overhead costs of Department C and D are allocated to products based on machine hours and labor hours respectively. Ross is preparing a bid for a job 601 that requires 4 machine hours per unit produced in Department C and no labor time in Department D. The expected prime costs per unit for Job 601 is $70. 1. Allocate the service department costs to production departments using the direct method. 2. Determine the bidding price for Job 601
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