Reference no: EM132650040

Zach Manufacturing has four categories of overhead. The four categories and expected overhead cost for each category for the next year are listed below.

Maintenance P200,000
Material Handling 32,000
Setups 100,000
Inspections 120,000

Current, overhead is applied using a predetermined overhead rate, based on budgeted direct labor hours. Fifty thousand (50,000) direct labor hours are budgeted for next year. The company has been asked to submit a bid for a proposal job. The plant manager feels that getting this job would result in new business in future years, Bids are based on full manufacturing cost plus 20 percent.

Estimated for the purposed job are as follows:

Direct Material P6,000
Direct Labor (1,000 hours) 10,000
Number of materials moves 12
Number of inspections 10
Number of setups 2
Number of machine hours 500

In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based cost driver, direct labor hours. The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers.

Expected activity for the four activity-based cost drivers that would be used are:

Machine hours 20,000
Moves 1,600
Setups 2,500
Quality inspections 40,000

Question 1: Determined the amount of overhead that would be allocated to the proposed job if direct labor hours is used as the volume-based cost driver.