The more competitive bid, Managerial Accounting

Assignment Help:

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.


Related Discussions:- The more competitive bid

What are the classification and computation of variances, Classification an...

Classification and computation of variances The computation and analysis of variances is the main aim of standard costing. The variance is the difference among the standard pe

Describe the benefits of operating decisions - relevant cost, Relevant cost...

Relevant costs and benefits for operating decisions: In operating decisions, concentration is on best use of existing capacity. Incremental analysis based on differential cost

Research and writing assignment, Write a response to your boss, the control...

Write a response to your boss, the controller. The response should be 2-5 pages in length (double-space). Your response to the controller should include, but not be limited to, t

International transfer pricing, International Transfer pricing Internat...

International Transfer pricing International transfer pricing refers to the determination of prices to be charged between related persons and in particular within a multination

Definition of activities based costing, Definition of Activities based cost...

Definition of Activities based costing Activity based costing is a system that focuses on activities as the fundamental cost objects and uses the costs of these activities as b

Activity based management, Activity Based Management (ABM) Also referre...

Activity Based Management (ABM) Also referred to as activity based cost management (ABCM). This is used to describe the cost management application of ABC. To implement A

What is meant by the term open book management, What is meant by the term O...

What is meant by the term Open Book Management? How does Open Book Management improve the organizations ability to achieve and improve results?

Motives for holding inventories, MOTIVES FOR HOLDING INVENTORIES If pro...

MOTIVES FOR HOLDING INVENTORIES If production and delivery of goods were instantaneous, there would be no need for inventories. However in reality, the manufacturing and purcha

Explain phases of life cycle of a product, Q. Explain Phases of life cycle ...

Q. Explain Phases of life cycle of a product? Every product move through a life cycle having five phases as shown in figure and they are 1) Pricing during introduction 2)

Write Your Message!

Captcha
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