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Determine the total cost of the proposed job using ABC

    Assignment Instructions

    Assignment ID: FG133048275

    Question – Company LSD LTD has 4 types of overhead. The four categories and expected costs for each category for next year are listed below

    Company LSD LTD

    Activity cost

    Setups cost $150,000

    Inspection cost $90,000

    Maintenance cost $120,000

    Material Handling cost $82,000

    Actual overhead Cost $30,000

    Estimates for the proposed job [Job #23] are as follows

    Direct Materials $6,000

    DL (1000 hours) $10,000

    Machine Hours [maintenance cost] 500

    # of material moves 12

    # of setups 5

    # of inspections 10

    Units produced 240

    The company has been asked to submit a bid for a proposed job. The plant manager thinks getting this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 30%.

    In the past, full manufacturing cost has been calculated by allocating overhead using volume based cost driver [[DLH]. The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers.

    Expected activity for the four activity based cost drivers that would be used are:

    Cost Drivers

    Machine Hours 15,000

    Material Moves 4,600

    Setups 3,500

    Quality Inspections 5,000

    Required –

    1. Calculate the predetermined rates using the Functional based costing.

    2. Determine the amount of overhead that would be applied to the proposed project if Functional based costing method is used?

    3. Determine the total cost of the proposed job using ABC?

    4. Calculate the unit cost using FBC?

    5. What bid price is the company going to use according to its FBC policy?

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    Asked by: Anonymous
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