Question #4 Indy Auto Parts has a seat-manufacturing department that uses ABC costing. The activity allocation rates are as follows: • Machining Assembling • Packaging • # of machine hours # of parts # of finished seats $30 per machine hour $.50 per part (fifty cents) $.90 per finished seat Suppose Ford has asked for a bid on 50,000 baby seats that would be installed as an option on some Ford vehicles. Each seat has 20 parts and the DM cost per seat is $11. The job would require 10,000 direct labor hours at a labor wage rate of $25 per hour. The company will use 400 machine hours to fabricate some of the parts required for the seats. a) Compute the total cost of producing and packaging 50,000 baby seats. Also - what is the average cost per seat? b) Indy will add a 30% markup to the total cost. What price will the company bid for the Ford order? c) Suppose that instead of using ABC, the company uses standard costing. The manufacturing overhead is a plant wide rate of $65 per direct labor hour. The baby seat order will require 10,000 direct labor hours. What would the total cost of the baby seats be under this system? What is the average cost per seat? What price will the company now bid for the Ford order?
Question #4 Indy Auto Parts has a seat-manufacturing department that uses ABC costing. The activity allocation rates are as follows: • Machining Assembling • Packaging • # of machine hours # of parts # of finished seats $30 per machine hour $.50 per part (fifty cents) $.90 per finished seat Suppose Ford has asked for a bid on 50,000 baby seats that would be installed as an option on some Ford vehicles. Each seat has 20 parts and the DM cost per seat is $11. The job would require 10,000 direct labor hours at a labor wage rate of $25 per hour. The company will use 400 machine hours to fabricate some of the parts required for the seats. a) Compute the total cost of producing and packaging 50,000 baby seats. Also - what is the average cost per seat? b) Indy will add a 30% markup to the total cost. What price will the company bid for the Ford order? c) Suppose that instead of using ABC, the company uses standard costing. The manufacturing overhead is a plant wide rate of $65 per direct labor hour. The baby seat order will require 10,000 direct labor hours. What would the total cost of the baby seats be under this system? What is the average cost per seat? What price will the company now bid for the Ford order?
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Question #4
Indy Auto Parts has a seat-manufacturing department that uses ABC costing. The activity
allocation rates are as follows:
• Machining
Assembling
• Packaging
•
# of machine hours
# of parts
# of finished seats
$30 per machine hour
$.50 per part (fifty cents)
$.90 per finished seat
Suppose Ford has asked for a bid on 50,000 baby seats that would be installed as an option
on some Ford vehicles. Each seat has 20 parts and the DM cost per seat is $11. The job
would require 10,000 direct labor hours at a labor wage rate of $25 per hour. The company
will use 400 machine hours to fabricate some of the parts required for the seats.
a) Compute the total cost of producing and packaging 50,000 baby seats. Also - what is
the average cost per seat?
b) Indy will add a 30% markup to the total cost. What price will the company bid for the
Ford order?
c) Suppose that instead of using ABC, the company uses standard costing. The
manufacturing overhead is a plant wide rate of $65 per direct labor hour. The baby seat
order will require 10,000 direct labor hours. What would the total cost of the baby seats
be under this system? What is the average cost per seat? What price will the company
now bid for the Ford order?
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