Reference no: EM132837311
The Company, a machine tooling firm, has several plants. One plant, located in St. Cloud, Florida uses a job order costing system for its batch production processes. The St. Cloud plant has two departments through which most jobs pass. Plant-wide overhead, which includes the plant manager's salary, accounting personnel, cafeteria, and human resources, is budgeted at $360,000. During the past year, actual plantwide overhead was $342,000. Each department's overhead consists primarily of depreciation and other machine-related expenses.
Selected budgeted and actual data from the St. Cloud plant for the past year are as follows.
Budgeted department overhead (excludes plantwide overhead)
Department A $110,000
Department B $480,000
Actual department overhead
Department A 144,000
Department B 500,000
Expected total activity:
Direct labor hours
Department A 40,000
Department B 20,000
Machine-hours
Department A 10,000
Department B 48,000
Actual activity:
Direct labor hours
Department A 40,500
Department B 18,900
Machine-hours
Department A 10,800
Department B 50,000
For the coming year, the accountants at the St. Cloud plant are in the process of helping the sales force create bids for several jobs. Projected data pertaining only to job no. 120
Direct materials$25,500
Direct labor cost:
Department A (2,800 hr) 42,000
Department B (1,500 hr) 8,000
Machine-hours projected:
Department A 180
Department B 1,200
Units produced 10,000
Problem 1) By Policy job bids be calculated by adding 22 percent to total manufacturing costs. What would be the bid for job no. 120 using the overhead rate from part a?
Problem 2) By policy St. Cloud plant dictates that job bids be calculated by adding 22 percent to total manufacturing costs. What would be the bid for job no. 120 using the overhead rate from part b?
Problem 3) Which of the overhead allocation methods would you recommend?