8 Carter Company has two categories of overhead maintenance

8. Carter Company has two categories of overhead: maintenance and inspection. Costs expected for these categories for th e coming year are as follows Maintenance Inspection $360,000 750,000 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 percent markup. Direct materials Direct labor Machine hours Number of inspections Direct labor hours $2,210 $5,625 450 4 550 otal expected machine hours for all jobs during the year are 60,000, and the total expected number of inspections is 4,000. Required a. 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. b.

Solution

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a
Direct Material	$            2,210
Direct Labour	$            5,625
Overhead(550*11)	$            6,050
Total Manufacturing Cost	$          13,885
Markup (13885*20%)	$            2,777
Bid Price	$          16,662