Problem Two PLANT-WIDE RATE AND ACTIVITY-BASED COSTING Hood Manufacturing Inc. has four categories of overhead. The expected overhead costs for each of the categories for the next year are as follows: Expected Activity Cost Driver Costs 60,000 20,000 3,000 12,000 $510,000 250,000 60,000 21,000 Machine hours Maintenance Material handling Setups Inspection Material moves Setups Inspections Currently, the company applies overhead using a predetermined overhead rate based upon budgeted direct labour hours of 100,000. The company has been asked to submit a bid on a proposed job. Usually bids are based upon full manufacturing costs plus a percentage of 10 percent. Estimates for the proposed job are as follows: $30,000 $24,000 8,000 100 120 Direct materials Direct labour Number of direct labour hours Number of material moves Number of inspections Number of setups Number of machine hours 24 4,000 Required: 1. If the company used activity-based cost drivers to assign overhead, calculate the bid price of the proposed job. 2. If the company used direct labour hours as the cost driver, calculate the bid price of the proposed job.
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