Reference no: EM13326972
a. Assume the St. Falls plant uses a single plantvvide overhead rate to assign all overhead (plant-wide,and department) costs to jobs. Use expected direct labor hours to compute the overhead ratektOind the overhead rate and determine the projected amount of total manufacturing costs per unit for the units_i_n jo_b no. 110.
b. Recalculate the projected manufacturing costs for job `no. 110 using three separate rates: one rate for pLattwiLleoyerlae.ad and two separate department overhead rates, all.based on machine-hours.
c. The sales policy at St. Falls dictates that job bids be calculated by addin00 percent to total manufacturing costs. What would be the bid for job no. 110 using tiSitie overhead rate from part a and (2)The-overhead rate froth part b? Explain why the bids differ. Which of the over-head allocation methods would you recommend and why?
d. Using the allocation rates in part b, compute the under- or overapplied overhead for the St. Falls plant for the year. Explain the impact on net income of assigning the under- or over-applied overhead to cost of goods sold rather than prorating the amount between inventories and cost of goods sold.
e. A St. Falls subcontractor has offered to produce the parts for job no. 110 for a price of $8 per unit. Assume the St. Falls sales force has already committed to the bid price based on the cal¬culations in part b. Should St. Falls buy the $8 per unit part from the subcontractor or continue to make the parts for job no. 110 itself?
f. Would your response to part e change if the St. Falls plant could use the facilities necessary to, produce parts for job no. 110 for another job that could earn an incremental profit of $15,000?
If the subcontractor mentioned in part e is located in Mexico, what additional international environmental issues, other than price, will Gilster and St. Falls management need to evaluate?
h. If Gilster Company management decides to undertake a target costing approach to pricing its jobs, what types of changes will it need to make for such an approach to be successful?
