King Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows:
Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. 50,000 direct labour hours are budgeted for next year.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually, bids are based upon full manufacturing cost plus 30 percent.
Estimates for the proposed job are as follows:
In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based activity driver, direct labour hours. The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers.
Expected activity for the four activity drivers that would be used are:
Required:
a.
Determine the amount of overhead that would be allocated to the proposed job if direct labour hours are used as the volume-based activity driver.
Determine the total cost of the proposed job.
Determine the company's bid if the bid is based upon full manufacturing cost plus 30 percent.
b.
Determine the amount of overhead that would be applied to the proposed project if activity-based costing is used.
Determine the total cost of the proposed job if activity-based costing is used.
Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent.
c.
Which product costing method produces the more competitive bid?
Correct Answer:
Verified
Q45: Identify Cooper and Kaplan's four categories of
Q46: The most critical step in activity-based costing
Q55: Compare and contrast traditional organization-based costing with
Q93: Figure 5
Peach, SA., has identified the following
Q94: Holbrook, SA., has identified the following overhead
Q95: Doyle Manufacturing Company has the following activities:
Q96: The Oakland plant has two categories of
Q99: Hunter Company manufactures two products (XX and
Q100: The Greenbriar plant has two categories of
Q102: Ernest, SA., has identified the following overhead
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents