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Hornsby Manufacturing has four categories of overheads. The four categories and the expected overhead costs for each category for next year are as follows: Maintenance $140,000 Materials handling 60,000 Set-ups 50,000 Inspection 100,000 Currently, overheads are applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 50,000 direct labour hours are budgeted. The company has been asked to submit a bid for a proposed job. The factory manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 30%. Estimates for the proposed job are as follows: Direct materials $5,000 Direct labour (750 hours) $7,500 Number of materials moves 8 Number of inspections 5 Number of set-ups 3 Number of machine hours 300 In the past, full manufacturing cost has been calculated by allocating overheads using a volume-based cost driver - direct labour hours. The factory 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 as follows: Machine hours 16,000 Material moves 4,000 Set-ups 2,000 Quality inspections 8,000 Required: (A) (i) Verify the amount of overheads that would be allocated to the proposed job if direct labour hours are used as the volume-based cost driver. (ii) verifythe total cost of the proposed job. (iii)) verify the company's bid if the bid is based upon full manufacturing cost plus 30%. (B) (i) Verify the amount of overheads that would be applied to the proposed job if activity-based costing is used. (ii) Verify the total cost of the proposed job if activity-based costing is used. (iii) Verify the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30%. (C) Which product costing method produces the more competitive bid? Provide a logical explanation for the difference between the two bid prices.
Accounts Payable Turnover Ratio is a short-term liquidity measure which is used to calculate the rate at which a company pays off its suppliers. Accounts payable turnover ratio is
we want to realize our job dreams, we need to think about ourselves as products to be marketed, and in order to do this, we need to contextualize ourselves within the five Ps of ma
Two types of costs concerned in factoring are as: 1) The service fee or factoring commission 2) The interest on advances granted through the factor to the firm. Factoring
Cost comprise impact Some of the policy choices which tend to have the maximum impact on cost comprise: Product performance, configuration, and characteristics Mix and
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Z or t Statistics If n ≥30 we use Z, if, n Ho: B = O that is, there is no relationship between X and Y HA: B≠ O There is a significant relationship between X and Y The l
Saddle Point The saddle point in a payoff matrix is one which is the smallest value in its row and the largest value in its column. It is also termed as equilibrium point in th
The Work in Process account for Monty's Company contained the following entries: Work in Process Account Debit of $40,000 for direct raw materials Debit of $60,000 for direct labor
After going through this section, you must be capable to: Know the need for establishing sound credit policy; Identify the different credit policy variables; Know the cred
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