Discuss how an allocation of overhead based on opportunity

Assignment Help Managerial Accounting
Reference no: EM13960251

Mighty Mint Co. produces a mint syrup used by gum and candy companies. Recently, the company has had excess capacity due to a foreign supplier entering its market. Mighty Mint is currently bidding on a potential order from Quality Candy for 5,000 cases of syrup. The estimated cost of each case is $21, as follows:

Direct material.......$7
Direct labor.........$5
Overhead..........$9
Total...........$21
The predetermined overhead rate is $1.80 per direct labor dollar. This was estimated by dividing estimated annual overhead ($1,080,000) by estimated annual direct labor ($600,000).The $1,080,000 of overhead is composed of $270,000 of variable costs and $810,000 of fixed costs. The largest fixed cost relates to depreciation of plant and equipment.

Required:

a. With respect to overhead, what is the opportunity cost of producing a case of syrup?
b. Suppose Mighty Mint can win the Quality Candy business by bidding a price of $18 per case (but no higher price will result in a winning bid). Should Mighty Mint bid $18?
c. Discuss how an allocation of overhead based on opportunity cost would facilitate an appropriate bidding decision.

Reference no: EM13960251

Questions Cloud

Primary factors led you to this decision : Mike begins, "I think we've done some pretty good analysis on our strategy. We just have to put the pieces together before the final presentation."
E-service quality-most challenging issues with employees : Why did two separate scales need to be developed to measure to measure e-service quality? How are they different? What experience did you have with owning a business prior to owning this franchise? (Get some details.) What is one of the most difficul..
What is the difference between residual income and eva : What is the difference between residual income and EVA?
Paper on a develop health behavior program : Write 10 page psychology paper on a develop health behavior program for overweight Native Hawaiian women in Hawaii
Discuss how an allocation of overhead based on opportunity : Discuss how an allocation of overhead based on opportunity cost would facilitate an appropriate bidding decision.
What is the probability of each of them winning : the game continues until soneone gets heads. What is the probability of each of them winning?
How the sun produces light and heat : How the sun produces light and heat? Write about Production of energy by nuclear fission. Describe the different zones where sun consists. Also mention about sun's atmosphere.
What is the rotational inertia of such a yo-yo : Competitive divers pull their limbs in a curl up their bodies when they do flips. Just before entering the water, they fully extend their limbs to enter straight down. Explain the effect of both actions on their angular velocity. What is the effec..
Include a clear and concise introduction : Format your case study assignment paper so that the three questions asked below are clearly defined. Double space your work, cite your work, limit quotes, and edit your work well for spelling, grammar, and punctuation errors. If you use any quot..

Reviews

Write a Review

Managerial Accounting Questions & Answers

  A car dealer acquires a used car

1. A car dealer acquires a used car for $ 14,000, terms FOB shipping point.

  Methods of analyzing financial statements

Address other methods of analyzing financial statements aside from ratio analysis and explain your analysis of the firm, and make recommendations for improvement.

  Fail to reject the null hypothesis

Fail to reject the null hypothesis, there is not significant evidence that the proportions differ.  Reject the null hypothesis, there is significant evidence that the proportions differ.

  The following information is from the materials requisitions

The following information is from the materials requisitions and time tickets for Job 9-1005 completed by Great Bay Boats.

  Determine the indirect labor support costs

Determine the per cent of unused indirect labour compared to available indirect labour hours. Draw conclusions from this analysis.

  While the comparable companies have varying marginal tax

While the comparable companies have varying marginal tax rates XYZ's marginal tax rate is 25%.

  The cost of performing inspection sampling moves inversely

The cost of performing inspection sampling moves inversely to the cost of quality failures. We can reduce the cost of quality failures by increased levels of inspection, ut that of course would increase the cost of inspection. Can you think of any me..

  Europes leading manufacturer of motorcycles and scooters

which is a leading manufacturer of two,three and four wheel vehicles, and is Europes leading manufacturer of motorcycles and scooters.

  Show the effect on financial statements

Evaluate the recommendation of the Vice president (Treating Ad as cost of production and overhead). The effect on financial statements and evaluate the recommendation of controller Morgan (Treating Ad as operating expense). The effect on financial ..

  Job-ordering costing system

Recognize three firms from 2009 FSB 100 which need a job-order costing system. Describe why they would most likely employ a job-order costing system.

  1 assume that in 2012 andre has charged customers 1500 per

1. assume that in 2012 andre has charged customers 15.00 per haircut has paid each of his six barbers a salary of 53000

  Prepare a production cost report for the month of march

Prepare a production cost report for the month of March and April

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd