Reference no: EM132794204

A factory has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows:

The plant currently applies overhead using direct labour hours and expected capacity of 100,000 direct labour hours. The following data has been assembled for use in developing a bid for a proposed job. Bid prices are calculated as full manufacturing cost plus 20 percent mark-up.

Direct materials      £2,800

Direct labour         £7,500

Machine hours            900

Number of inspections     8

Direct labour hours    1,100

Maintenance               £240,000

Inspection                    £500,000

Total expected machine hours for all jobs during the year is 60,000, and the total expected number of inspections is 4,000.

Required:

problem (a) Compute (i) the total cost of the potential job using direct labour hours to assign overhead and (ii) determine the bid price for the potential job.

problem (b) Compute (i) the total cost of the job using activity-based costing and the appropriate cost drivers and (ii) determine the bid price if activity-based costing is used.