"Don't tell me we've lost another bid!" exclaimed Janice Hudson, president of Prime Products, Inc. "I'm afraid so," replied Doug Martin, the operations vice-president. "One of our competitors underbid us by about $17,000 on the Hastings job." "I just can't figure it out," said Hudson. "It seems we're either too high to get the job or too low to make any money on half the jobs we bid. What's happened?"
Prime Products manufactures specialized goods to customers' specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labor cost. The following estimates were made at the beginning of the year