Bailey Corporation has four categories of overhead.
Bailey Corporation has four categories of overhead. The expected overhead costs for each category for next year are as follows:Maintenance $420,000Materials handling 180,000Setups 150,000Inspection 300,000The company has been asked to submit a bid for a proposed job. The plant manager believes that obtaining this job would result in new business in future years. Bids are usually based upon full manufacturing cost plus 30 percent. Estimates for the proposed job are as follows:Direct materials $10,000Direct labor (750) hours $15,000Number of material moves 8Number of inspections 5Number of setups 3Number of machine hours 300Expected activity for the four activity-based cost drivers that would be used is:Machine hours 20,000Material moves 4,000Setups 200Quality inspections 8,000Required:a. Determine the amount of overhead that would be allocated to the proposed job if 40,000 direct labor-hours are used as the volume-based cost driver. Determine the total costs of the proposed job. Determine the company’s bid if the bid is based upon full manufacturing cost plus 30 percent. (round amounts to 2 decimal places.)b. Determine the amount of overhead that would be applied to the proposed project if activity based costing is used. Determine the company’s bid if activity-based costing is used and the bid is based upon full manufacturing costs plus 30 percent. (round amounts to 2 decimal places.)c. which product costing method produces the more competitive bid?
