Figure 4 13 The Molotov plant of Kaboom Industries has two categories of

Figure 4 13 the molotov plant of kaboom industries

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127. Figure 4-13The Molotov plant of Kaboom Industries has two categories of overhead: maintenance and inspection.Costs expected for these categories for the coming year are as follows:Maintenance$50,000Inspection75,000The plant currently applies overhead using direct labor hours and expected capacity of 50,000 direct labor hours. The following data have been assembled for use in developing a bid for a proposed job:Direct materials$500Direct labor$2,000Machine hours500Number of inspections4Direct labor hours800
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Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500.Refer to Figure 4-13. Using activity-based costing and the appropriate activity drivers, the total cost of the potential job would be 128. Figure 4-13The Molotov plant of Kaboom Industries has two categories of overhead: maintenance and inspection.Costs expected for these categories for the coming year are as follows:Maintenance$50,000Inspection75,000The plant currently applies overhead using direct labor hours and expected capacity of 50,000 direct labor hours. The following data have been assembled for use in developing a bid for a proposed job:Direct materials$500Direct labor$2,000Machine hours500Number of inspections4Direct labor hours800Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500.Refer to Figure 4-13. Using direct labor hours to assign overhead, the total cost of the potential job would be 129. Figure 4-14Lawson Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows:Maintenance$180,000Materials handling27,000Setups24,000Inspection90,000
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Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours. 20,000 direct labor hours are budgeted for next year.The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 15 percent. Estimates for the proposed job are as follows:Direct materials$3,000Direct labor (600 hours)$9,000Number of material moves4Number of inspections6Number of setups8Number of machine hours80In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based activity driver, direct labor hours. The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers. Expected activity for the four activity drivers that would be used are:Machine hours5,000Material moves600Setups200Quality inspections1,000Refer to Figure 4-14. If material moves are used to assign material handling costs, the amount of material handling costs allocated to the proposed job would be
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