The Jewell plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows: Maintenance Rs.360,000 Inspection 750,000 The plant currently applies overhead using direct labor hours and expected capacity of 100,000 direct labor hours. The following data has been assembled for use in developing a bid for a proposed job. Bid prices are calculated as full manufacturing cost plus a 20% mark-up. Direct materials Rs.2,100 Direct labor 5,625 Machine hours 450 Number of inspections 4 Direct labor hours 550 Total expected machine hours for all jobs during the year are 60,000, and the total expected number of inspections is 4,000. Required: Compute the total cost of the potential job using direct labor hours to assign overhead. Determine the bid price for the potential job. Compute the total cost of the job using activity-based-costing and the appropriate activity drivers. Determine the bid price if activity-based-costing is used. Prepare a memorandum to the plant manager recommending a bid price for the potential job. Support your recommendation by explaining which costing method best reflect the actual cost of the job

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter2: Job Order Costing

Section: Chapter Questions

Problem 4BE: Applying factory overhead Bergan Company estimates that total factory overhead costs will be 620,000...

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Question No.3

The Jewell plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows:

Maintenance Rs.360,000

Inspection 750,000

The plant currently applies overhead using direct labor hours and expected capacity of 100,000 direct labor hours. The following data has been assembled for use in developing a bid for a proposed job. Bid prices are calculated as full manufacturing cost plus a 20% mark-up.

Direct materials Rs.2,100

Direct labor 5,625

Machine hours 450

Number of inspections 4

Direct labor hours 550

Total expected machine hours for all jobs during the year are 60,000, and the total expected number of inspections is 4,000.

Required:

Compute the total cost of the potential job using direct labor hours to assign overhead. Determine the bid price for the potential job.

Compute the total cost of the job using activity-based-costing and the appropriate activity drivers. Determine the bid price if activity-based-costing is used.

Prepare a memorandum to the plant manager recommending a bid price for the potential job. Support your recommendation by explaining which costing method best reflect the actual cost of the job.

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