Poseidon Company Produces Customized Sailboats

Poseidon Company produces customized sailboats.The company uses a job order costing system.Its plant has three production departments: cutting,machining,and assembly.The estimated manufacturing overhead cost and direct labor cost for each department for 2011 follow:
Cutting Machining Assembly

In May 2011,the company received an invitation from Duluth Sailing Company to bid on an order of five luxury sailboats that must be delivered by the end of September 2011.This Duluth Job would require direct manufacturing costs in the three departments as follows:

Required:
a. Assume that a single,plantwide predetermined manufacturing cost driver rate based on direct labor cost is used.Determine the manufacturing cost driver rate and manufacturing overhead costs applied to the Duluth Job.
b. Assume that separate,departmental predetermined manufacturing cost driver rates based on direct labor cost are used in each department.Determine the departmental manufacturing cost driver rates and manufacturing overhead costs applied to the Duluth job.
c. Assume that Poseidon has a policy to add a 60% markup to estimated job costs to arrive at the bid price. Determine the bid price for the Duluth job using:
1.a plantwide manufacturing overhead cost driver rate; and
2.departmental manufacturing overhead cost driver rates.
d. Review the bid prices computed in (c).Why do the two bids differ?
e. What are the possible consequences of overbidding a job? Underbidding a job?