Lacy Company manufactures specialty tools to customer order. Budgeted overhead for the coming… 1 answer below »
Ace your studies with our custom writing services! We've got your back for top grades and timely submissions, so you can say goodbye to the stress. Trust us to get you there!
Order a Similar Paper Order a Different Paper
Lacy Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is as follows:
Purchasing
$30,000
Engineering
$20,000
Setups
15,000
Other
25,000
Previously, Jennifer Langston, Lacy Company’s controller, had applied overhead on the basis of machine hours. Expected machine hours for the coming year are 10,000. Jennifer has been reading about activity-based costing, and she wonders whether or
not it might offer some advantages to her company. She decided that appropriate drivers for overhead activities are purchase orders for purchasing, number of setups for setup cost, engineering hours for engineering cost, and machine hours for other. Budgeted amounts for these drivers are 5,000 purchase orders, 1,000 setups, and 500 engineering hours.
Jennifer has been asked to prepare bids for two jobs with the following information:
Job 1
Job 2
Direct materials
$4,500
$8,600
Direct labor
$1,000
$2,000
Number of purchase orders
15
20
Number of setups
2
3
Number of engineering hours
25
10
Number of machine hours
200
200
The typical bid price includes a 30 percent markup over full manufacturing cost.
Required
1. Calculate a plantwide rate for Lacy Company based on machine hours. What is the bid price of each job using this rate?
2. Calculate activity rates for the four overhead activities. What is the bid price of each job using these rates?
3. Which bids are more accurate? Why?
Looking for top-notch essay writing services? We've got you covered! Connect with our writing experts today. Placing your order is easy, taking less than 5 minutes. Click below to get started.
Order a Similar Paper Order a Different Paper