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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?

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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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?
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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