Zach Manufacturing has four categories of overhead. The four categories and expected overhead cost for each category for the next year are listed below.

Maintenance P200,000

Material Handling 32,000

Setups 100,000

Inspections 120,000

Current, overhead is applied using a predetermined overhead rate, based on budgeted direct labor hours. Fifty thousand (50,000) direct labor hours are budgeted for next year. The company has been asked to submit a bid for a proposal job. The plant manager feels that getting this job would result in new business in future years, Bids are based on full manufacturing cost plus 20 percent.

Estimated for the purposed job are as follows:

Direct MaterialP6,000

Direct Labor (1,000 hours) 10,000

Number of materials moves12

Number of inspections10

Number of setups2

Number of machine hours500

In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based cost driver, direct labor hours. The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers.

Expected activity for the four activity-based cost drivers that would be used are:

Machine hours20,000

Moves1,600

Setups2,500

Quality inspections40,000

Determined the amount of overhead that would be allocated to the proposed job if direct labor hours is used as the volume-based cost driver.