The gilster company, a machine tooling firm, has several plants, one plant, located in St falls, minnesota, uses a job order costing system for its batch production processes. The st. falls plant has two departments through which most jobs pass. plantwide overhead, which includes the plant managers salary, accounting personnal, cafeteria, and human services, is budgeted at $ 200,000. during the past year, actual plantwide overhead was 190,000. Each departments overhead consists primarily of depreciation and other machine-related expenses. Selected budgeted and actual data from the st. falls plant for the past year are as follows
- Budgeted department overhead
- (excludes plant wide overhead)Department A100,000Department B500,000
- Direct labor hours50,000,10,000
- Machine hours.10,000 50,000
- Actual activity
- Direct labor hours 51,000.9.000
- Machine hours.10,500,52,000
For the coming year, the accountants at st. falls are in the process of helping the sales force create bids for several jobs. Projected data pertaining to job no. 110 are as follows
- Direct materials,20,000
- Direct labor cost:
- Department A.( 2,000 HR),30,000
- department B ( 500 hr) 6,000
- Machine hours projected:
- Department A 100
- Department B 1,200
- Units produced 10,000
Instructions round overhead rate and unit costs to 2 decimal places and round other cost calculations to the nearest dolla
A) Assume the st. falls plant uses a single plantwide overhead rate to assign all over head costs to jobs. use expected direct labor hours to compute the overhead rate. find the overhead rate and determine the projected amount of total manufacturing costs per unit in job no. 110.
B) recalculate the projected manufacturing costs for job no. 110 using three separate rates: one rate for plantwide overhead and two separate department overhead rates, all based on machine-hours.
C) The sales policy at st. falls dictates that job bids be calculated by adding 30 percent to total manaufacturing costs. what would be the bid for job no. 110 using 1) the overhead rate from part A and 2) the overhead rate from part B? explain why the bids differ. which of the over head allocation methods would you recommend and why?
D) using allocation rates in part B, compare the under-or over applied overhead for the st. falls plant for the year. explain the impact on net income of assigning the under- overapplied overhead to cost of goods sold rather than prorating the amount between inventories and cost of goods sold.
E) A st. falls subcontractor has offered to produce the parts for job 110. for a price of $ 8 per unit. Assume the st. falls sales force has already committed to the bid price based on the calculations in part B. should st. falls buy the 8 per unit part from the subcontractor or continue to make the parts for job no. 110 itself.
F) would your response to part e change if the st. falls plant could use the facilities necessary to produce parts for job no. 110 for another job that could earn incremental profit of $ 15,000
G) if the subcontractor mentioned in part e is located in mexico, what additional international environmental issues, other than price, will gilster and st. falls management need to evaluate.