the glister company a machine tooling firm has several plants. 1 plant located in St Falls Minnesota uses a job order costing system for a batch production processes. the st. Paul’s plant has to do dept through which most jobs past. Plantwide overhead which includes the plant manager salary accounting personnel cafeteria and human resources is budgeted at $250,000. during the past year actual plantwide overhead was $240,000. each dept overhead consists primarily of depreciation and other machine related expenses. selected budgeted and actual data from the same falls plant for the past year are as follows:
DepartmentA. Department B
budget dept overhead $150,000 $600,000
excludes plantwide overhead
actual dept overhead. 160,000. 620,000
expected total activity
direct labor hours. 35,000. 15,000
machine hours. 10,000. 40,000
direct labor hours. 51,000. 9,000
machine hours. 10,500. 42,000
for the coming year the accountants at st. Falls are in the process of helping the sales force can create bids for several jobs. projected data pertaining only to job number 110 are as follows:
direct materials $25,000
direct labor cost
dept a(2200 hours)45,000
machine hours projected
dept a. 200
dept be. 1200
units produced 10000
A. Assume that st Falls plant uses a single plant wide overhead rate to assign all over had plantwide and dept cost two jobs use expected total direct labor hours to compute the overhead rate. what is the expected cost per unit produced for job number 110?
b. recalculate the projected manufacturing cost for job number 110 using three separate rate 14 plant wide overhead and two separate department overhead rate all based on machine hours.
C. The sales policy at st. falls dictates that job bids be calculated by adding 40% to total manufacturing costs. what would be the bid for a job number 110 using 1.the overhead of rate from Part A and 2. the overhead rate from Part B? explain why the bids differ.which of the overhead allocation methods would you recommend and why
d. Using the allocation rate in Part B compute under or over applied overhead for st. Falls plant for the year. explain the impact on net income of a signing the under or overapplied overhead to cost of good sold rather than prorating the amount between inventory and cost of good sold.
e. A saint paulse. A st. Falls subcontractor has offered to produce the parts for job number 110 for a price of $12 per unit. Assume that steep falls Salesforce has already committed to the bid price based on the calculations in Part B. should st.falls buy the $12 per unit parts from the subcontractor or continue to make the parts for job
number 110 itself.
F.would you response to part e change if st. falls plant could use the facilities necessary to provide parts for job number 110 for another job that can earn and incremental profit of $20,000
G.if the subcontractor mentioned in Part e is located in Mexico what additional international environmental issues other than price will glister and st. falls management need to evaluate?
H. if glister company management decides to undertake a target costing approach to pricing its job what types of challenges will it need to make for such an approach to be successful?
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