P545 B LOI 2 Mars Company has four categories of overhead pu

P5.45 B (LOI 2) Mars Company has four categories of overhead: purchasing and receiving materials, machine Assign overhead costs operating costs, material handling, and shipping. The costs estimated for these categories for the coming year are as using traditional costing and ABC compare results follows: and receiving materials S Machine operating costs Material handling Shipping Total 900,000 160,000 140,000 $1,500,000

Solution

Req 1: Estimated Overheads 1500000 Divide: Estimated Machine hours 300000 Pre-determined OH rate 5 Bid price for Job 287: Material per unit 1.35 labour cost per unit 1.85 Overheads applied per unit 2.5 (3000 MH @5) /6000 units Total cost 5.7 Add: mark up @25% 1.425 Bid price for Job 287: 7.125 Req b: Activity rate: STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Purchasng and receiving Number of receipts 300000 3000 100 machine Operating MH 900,000 300,000 3 Material Handling Material Moves 160,000 400,000 0.4 Shipping No. of Kms 140,000 280,000 0.5 Manufacturing cost per unit: Material (1.35*6000) 8100 Labour (1.85*6000) 11100 Activity cost: Purchasing and receiving (3*100) 300 Machine Operating (3000*3) 9000 Materila handling (300*.4) 120 Shipping (2300*.50) 1150 Total cost 29770 Divide : Number of units 6000 Manufacturing cost per unit: 4.96 Add: markup@25% 1.24 Bid price for Job 287 6.2