Reference no: EM13555879

Sanders Manufacturing Company produces electronic components on a job order basis. Most business is gained through bidding on jobs. Most firms competing with Sanders bid full cost plus a 30% markup. Recently, with the expectation of gaining more sales, Sanders dropped its markup from 40% to 30%. The company operates two service departments and two production departments. Manufacturing overhead costs and quantities of activities for each department are shown here:

Costs of the personnel department are allocated on the basis of employees and those of the maintenance department on the basis of maintenance hours. Departmental rates are used to assign overhead costs to products. The machining department uses machine hours, and the assembly department uses direct labor hours for this purpose.
The firm is preparing to bid on job 781, which requires three machine hours per unit produced in the machining department and five direct labor hours per unit produced in the assembly department. The expected direct materials and direct labor costs per unit are $450.

Required

(a) Allocate the service department costs to the production departments using the direct method.

(b) Determine the bid price per unit produced for job 781 using the direct method.

(c) Assume that the costs of the service department incurring the greatest cost are allocated first, and allocate the service department costs to the production departments using the sequential method. When allocating personnel costs, assume the maintenance department has 0 employees.

(d) Determine the bid price per unit produced for job 781 using the sequential method in partc.