QQuestionAccounting
QuestionAccounting
Gibson Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winfield High School band jacket job.
Company Winfield High School Job
Direct materials $40,000 $1,000
Direct labor $10,000 $200
Manufacturing overhead costs $30,000
Machine-hours 100,000 mh 900 mh
Required:
1.Determine the overhead cost allocation rate
2.Calculate the amount of overhead allocated to the Winfield High School Job
3.Calculate the total manufacturing costs charged to this job
4.What is the bid price for this job if Gibson uses a 40% mark-up on total manufacturing costs.
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Answer
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Step 1
Overhead allocation rate = $$\frac{\$30,000}{100,000 \text{ mh}} = \boxed{\$0.30 \text{ per machine-hour (mh)}}
To determine the overhead cost allocation rate, we need to divide the total estimated manufacturing overhead costs by the total estimated machine-hours:
Step 2
Overhead allocated = $$\$0.30 \text{ per mh} × 900 \text{ mh} = \boxed{\$270}
Now, we can calculate the amount of overhead allocated to the Winfield High School Job by multiplying the overhead allocation rate by the number of machine-hours for this job: Overhead allocated = Overhead allocation rate × Machine-hours for the job
Final Answer
Bid price = \$1,470 × (1 + 0.40) = \boxed{\$2,058}
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