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Problem - Barok Manufacturing produces machine parts on a job-order basis. Most business is obtained through bidding. Most firms competing with Barok bid full cost plus a 20% markup. Recently, with the expectation of gaining more sales, Barok reduced its markup from 25% to 20%. The company operates two service departments and two producing departments. The budgeted costs and the normal activity levels for each department are given below. The direct costs of Department A are allocated on the basis of employees. The direct costs of Department B are allocated on the basis of maintenance hours. Departmental overhead rates are used to assign costs to products. Department C uses machine hours, and Department D uses labor hours. The firm is preparing to bid on a job (Job K) that requires three machine hours per unit produced in Department C and no time in Department D. The expected prime costs per unit are $67.
Required -
1. What will the bid be for Job K if the direct method of allocation is used?
2. Allocate the service costs to the producing departments by using the sequential method.
3. What will the bid be for Job K if the sequential method is used?
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