Question
XYZ Company has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows: Maintenance $420,000 Inspection
XYZ Company has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows:
Maintenance $420,000
Inspection $600,000
The plant currently applies overhead using direct labor hours and expected capacity of 100,000 direct labor hours. The following data has been assembled for use in developing a bid for a proposed job. Bid prices are equal to the full manufacturing cost plus a 30 percent markup.
Direct materials $3,500
Direct labor $6,500
Machine hours 400
Number of inspections 5
Direct labor hours 600
Total expected machine hours for all jobs during the year are 60,000, and the total expected number of inspections is 5,000.
Required:
- Compute the total cost of the potential job using direct labor hours to assign overhead.
Determine the bid price for the potential job.
- Compute the total cost of the job using activity-based costing and the appropriate activity drivers.
Determine the bid price if activity-based costing is used.
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