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Merrillville Auto Parts (MAP) has a Seat Assembly Department that uses activity-based costing. MAP's system has the following activities: (Click the icon to view the activities.) Each baby seat has 22 parts. Direct materials cost per seat is $20. Direct labor cost per seat is $9. Suppose an automobile manufacturer has asked MAP for a bid on 20,000 built-in baby seats that would be installed as an option on its SUVS. MAP will use a total of 280 purchase orders if the bid is accepted. Read the requirements. Requirement 1. Compute the total cost MAP will incur to (a) purchase the needed materials and then (b) assemble and (c) package 20,000 baby seats. Also, compute the average cost per seat. (Round the average cost per seat to the nearest cent.) Activity costs: Total cost of order Divide by Average cost per seat Requirement 2. For bidding, MAP adds a 10% markup to total cost. What total price will MAP bid for the entire order? MAP will bid for the entire order. Requirement 3. Suppose that instead of an ABC system, MAP has a traditional product costing system that allocates indirect costs at the rate of $54 per direct labor hour. The baby seat order will require 8,000 direct labor hours. What price will MAP bid using this system's total cost assuming a 10% markup to total cost? First, compute the total cost of the order using a traditional product costing system. Total cost of order MAP will bid using this system's total cost assuming a 10% markup to total cost. Requirement 4. Use your answers to Requirements 2 and 3 to explain how ABC can help MAP make a better decision about the bid price. MAP's bid would be $ using the traditional system than using ABC. Assuming the ABC system more accurately captures the costs caused by the order, the traditional system. the order. This leads to a bid price and MAP's chance of winning the order. The ABC system can chance of winning the order by bidding a price. MAP's

Merrillville Auto Parts (MAP) has a Seat Assembly Department that uses activity-based costing. MAP's system has the following activities: (Click the icon to view the activities.) Each baby seat has 22 parts. Direct materials cost per seat is $20. Direct labor cost per seat is $9. Suppose an automobile manufacturer has asked MAP for a bid on 20,000 built-in baby seats that would be installed as an option on its SUVS. MAP will use a total of 280 purchase orders if the bid is accepted. Read the requirements. Requirement 1. Compute the total cost MAP will incur to (a) purchase the needed materials and then (b) assemble and (c) package 20,000 baby seats. Also, compute the average cost per seat. (Round the average cost per seat to the nearest cent.) Activity costs: Total cost of order Divide by Average cost per seat Requirement 2. For bidding, MAP adds a 10% markup to total cost. What total price will MAP bid for the entire order? MAP will bid for the entire order. Requirement 3. Suppose that instead of an ABC system, MAP has a traditional product costing system that allocates indirect costs at the rate of $54 per direct labor hour. The baby seat order will require 8,000 direct labor hours. What price will MAP bid using this system's total cost assuming a 10% markup to total cost? First, compute the total cost of the order using a traditional product costing system. Total cost of order MAP will bid using this system's total cost assuming a 10% markup to total cost. Requirement 4. Use your answers to Requirements 2 and 3 to explain how ABC can help MAP make a better decision about the bid price. MAP's bid would be $ using the traditional system than using ABC. Assuming the ABC system more accurately captures the costs caused by the order, the traditional system. the order. This leads to a bid price and MAP's chance of winning the order. The ABC system can chance of winning the order by bidding a price. MAP's

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Merrillville Auto Parts (MAP) has a Seat Assembly Department that uses activity-based costing. MAP's system has the following activities: (Click the icon to view the activities.) Each baby seat has 22 parts. Direct materials cost per seat is $20. Direct labor cost per seat is $9. Suppose an automobile manufacturer has asked MAP for a bid on 20,000 built-in baby seats that would be installed as an option on its SUVS. MAP will use a total of 280 purchase orders if the bid is accepted. Read the requirements. Requirement 1. Compute the total cost MAP will incur to (a) purchase the needed materials and then (b) assemble and (c) package 20,000 baby seats. Also, compute the average cost per seat. (Round the average cost per seat to the nearest cent.) Activity costs: Total cost of order Divide by Average cost per seat Requirement 2. For bidding, MAP adds a 10% markup to total cost. What total price will MAP bid for the entire order? MAP will bid for the entire order. Requirement 3. Suppose that instead of an ABC system, MAP has a traditional product costing system that allocates indirect costs at the rate of $54 per direct labor hour. The baby seat order will require 8,000 direct labor hours. What price will MAP bid using this system's total cost assuming a 10% markup to total cost? First, compute the total cost of the order using a traditional product costing system. Total cost of order MAP will bid using this system's total cost assuming a 10% markup to total cost. Requirement 4. Use your answers to Requirements 2 and 3 to explain how ABC can help MAP make a better decision about the bid price. MAP's bid would be $ using the traditional system than using ABC. Assuming the ABC system more accurately captures the costs caused by the order, the traditional system the order. This leads to a bid price and MAP's chance of winning the order. The ABC system can chance of winning the order by bidding a price. MAP's
Transcribed Image Text:Merrillville Auto Parts (MAP) has a Seat Assembly Department that uses activity-based costing. MAP's system has the following activities: (Click the icon to view the activities.) Each baby seat has 22 parts. Direct materials cost per seat is $20. Direct labor cost per seat is $9. Suppose an automobile manufacturer has asked MAP for a bid on 20,000 built-in baby seats that would be installed as an option on its SUVS. MAP will use a total of 280 purchase orders if the bid is accepted. Read the requirements. Requirement 1. Compute the total cost MAP will incur to (a) purchase the needed materials and then (b) assemble and (c) package 20,000 baby seats. Also, compute the average cost per seat. (Round the average cost per seat to the nearest cent.) Activity costs: Total cost of order Divide by Average cost per seat Requirement 2. For bidding, MAP adds a 10% markup to total cost. What total price will MAP bid for the entire order? MAP will bid for the entire order. Requirement 3. Suppose that instead of an ABC system, MAP has a traditional product costing system that allocates indirect costs at the rate of $54 per direct labor hour. The baby seat order will require 8,000 direct labor hours. What price will MAP bid using this system's total cost assuming a 10% markup to total cost? First, compute the total cost of the order using a traditional product costing system. Total cost of order MAP will bid using this system's total cost assuming a 10% markup to total cost. Requirement 4. Use your answers to Requirements 2 and 3 to explain how ABC can help MAP make a better decision about the bid price. MAP's bid would be $ using the traditional system than using ABC. Assuming the ABC system more accurately captures the costs caused by the order, the traditional system the order. This leads to a bid price and MAP's chance of winning the order. The ABC system can chance of winning the order by bidding a price. MAP's
Vh Data table Activity Purchasing Assembling Packaging Allocation Base Cost Allocation Rate Number of purchase orders $80.00 per purchase order Number of parts $0.30 per part Number of finished seats $3.00 per finished seat Print Done - X
Transcribed Image Text:Vh Data table Activity Purchasing Assembling Packaging Allocation Base Cost Allocation Rate Number of purchase orders $80.00 per purchase order Number of parts $0.30 per part Number of finished seats $3.00 per finished seat Print Done - X
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