Jack Halpern is the owner, and CEO ofAerospace Comfort, a firm specializing in the manufacturing ofseats for airplanes. He has just received a copy of a letterwritten to the General Audit Section on the U.S. Navy. He believesit is from an ex-employee fo Aerospace. Dear Sir, Aerospace Comfort manufactured 100 X7 seats for the Navy in2009. The following may be of interest:
1. Direct materials cost billed for the 100 X7 seats were$25,000.
2. Direct manufacturing labor costs bill for 100 X7 seats were$6,000. These costs include 16 hrs. fo setup labor at $25 per hr,an amount included in the manufacturing overhead cost pool as well.The $6,000 also includes 12 hrs of design time at $50 an hr.Design time was explicitily identified as a cost the Navy would notreimburse.
3. Manufacturing overhead costs billed for 100 X7 seats were$9,000 (150% of direct manufacturing labor costs) This amountincludes the 16 hrs of setup labor at $25 an hr that is incorrectlyincluded as part of direct manufacturing labor costs. You may also want to know that over 40% fo the directmaterials is purchased for Frontier Tech, a company that is 51%owned by Jack Halperns brother.
Are ospace Comfort's contract state taht the Navy reimburses at130% of total manufacturing costs. Assume athat the facts in theletter are correct as you answer.
1. What is the cost amount per X7 seat that Aerospace Comfortbilled the Navy? Assume that the actual direct material costs were$25,000.
2. What is the amount per X7 seat that Aerospace Comfortshould have billed the Navy? Assume that the actual direct materials costs were $25,000.