Custom Wood Products has two production departments: Cutting and Assembly. The company has been using a single predetermined cost driver rate based on plantwide direct labour hours. That is, the plantwide cost driver rate is computed by dividing plantwide support costs by total plantwide direct labour hours. The estimates for support costs and quantities of cost drivers for 2006 follow: Cutting Assembly Total__ Manufacturing support cost 25,000 $35,000 $60,000 Direct labour hours 1,000 3,000 4,000 Machine hours 4,000 2,000 6,000 The company received an invitation from NuTech Ltd. to bid on a job – Job # 101. This job would require direct manufacturing costs in the two departments as follows: Cutting Assembly Direct material cost $8,000 $1,400 Direct labour cost $250 $800 Direct labour hours 7 35 Machine 50 - Required a) Calculate the single plantwide cost driver rate (using direct labour hours for 2006) b) Determine the total cost to be charged to Job 101, using the single plantwide rate. c) Calculate the departmental cost driver rates based on direct labour hours for assembly and machine hours for cutting. d) Determine the total cost to be charged to Job 101, using the departmental rates. e) The company has a policy to add a50% markup to estimated job costs to arrive at the bid price. Determine the bid price for Job 101, using: the plantwide manufacturing support cost driver rate; and the departmental manufacturing cost driver rates.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Custom Wood Products has two production departments: Cutting and Assembly. The company has been using a single predetermined cost driver rate based on plantwide direct labour hours. That is, the plantwide cost driver rate is computed by dividing plantwide support costs by total plantwide direct labour hours. The estimates for support costs and quantities of cost drivers for 2006 follow:
Cutting Assembly Total__
Manufacturing support cost 25,000 $35,000 $60,000
Direct labour hours 1,000 3,000 4,000
Machine hours 4,000 2,000 6,000
The company received an invitation from NuTech Ltd. to bid on a job – Job # 101. This job would require direct
Cutting Assembly
Direct material cost $8,000 $1,400
Direct labour cost $250 $800
Direct labour hours 7 35
Machine 50 -
Required
a) Calculate the single plantwide cost driver rate (using direct labour hours for 2006)
b) Determine the total cost to be charged to Job 101, using the single plantwide rate.
c) Calculate the departmental cost driver rates based on direct labour hours for assembly and machine hours for cutting.
d) Determine the total cost to be charged to Job 101, using the departmental rates.
e) The company has a policy to add a50% markup to estimated
- the plantwide manufacturing support cost driver rate; and
- the departmental manufacturing cost driver rates.
Step by step
Solved in 3 steps
Determine the total cost to be charged to Job 101, using the departmental rates.
e) The company has a policy to add a50% markup to estimated
- the plantwide manufacturing support cost driver rate; and
- the departmental
manufacturing cost driver rates.
by Bartleby Expert
