You received an order for 100 outboard motors from 'Great Adventure' retailers and they are happy to offer $900 per motor. However, it required a special logo printed on the machine and it has to buy from an external supplier for $25 each. Each motor required one logo and it won't take an additional machine hour. William wants to know the manufacturing cost for this job. AMT has a production budget of 600 motors for the current year. AMT used direct labour hours for machine operating and assembling (not electrician's hours) as an overhead cost allocation base to allocate manufacturing overhead costs. Assume the current year's budgeted overhead is the same as last year's. Budget motors was expected to sell 500 motors last year with $1,200 for each. (Let's say last year's income was $100,000)

Required:

a). Calculate the predetermined overhead allocation rate (POHR), the overhead allocated amount for this job, the direct manufacturing cost for this job, and the total manufacturing cost for this job.

b). After seeing your unit cost for the current year, Oliver said that there might be something wrong in your calculation. Last year our production was 500 motors and this year If we produced 600 units, the total manufacturing cost should be higher compared to last year as production has increased. Thus, the unit cost will also increase. Is Oliver right or wrong in his statement? Show your calculation for supporting your argument.

c). Even though the production budget is prepared for 600 motors, the business has manufactured only 550 motors. Is it under-allocated OH or overallocated OH? How much? Show your work. (Assume actual overhead is the same as the budgeted) What would be the impact of the cost of goods sold and gross profit if this over/under amount write off to the cost of goods sold?