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Vaders Helmet Corporation has four categories of overhead. The expected overhead costs for each category and the expected activity for the four activity-based cost drivers

Vaders Helmet Corporation has four categories of overhead. The expected overhead costs for each category and the expected activity for the four activity-based cost drivers that would be used in total for next year are as follows:

Overhead Category

Total Cost

Cost Drivers

Activity Level

Maintenance

$420,000

Machine-hours

20,000

Materials handling

180,000

Material moves

4,000

Setups

150,000

Setups

200

Inspection

300,000

Quality inspections

8,000

$1,050,000

Vader has been asked to submit a bid for a proposed job to make special black helmets that detach into separate parts. The plant manager believes that obtaining this job would result in new business in markets across the galaxy. Bids are usually based upon full manufacturing cost plus 30 percent. Estimates for the proposed job are as follows:

Direct materials

$10,000

Direct labor (750 hours)

$15,000

Number of material moves

8

Number of inspections

5

Number of setups

3

Number of machine-hours

300

Required:

a. Determine the amount of overhead that would be applied to the proposed project if activity-based costing is used, and

the total costs of the proposed job. Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent. (Round amounts to 2 decimal places.)

b. Determine the amount of overhead that would be allocated to the proposed job if 40,000 direct labor-hours are used as the volume-based cost driver for the year (traditional method of allocation). Determine the total costs of the proposed job. Determine the company's bid if the bid is based upon full manufacturing cost plus 30 percent. (Round amounts to 2 decimal places.)

c. Which product costing method produces the more competitive bid?

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