Winter Manufacturing Has Four Categories of Overhead Currently,overhead Is Applied Using a Predetermined Overhead Rate Based Upon

question 118

Multiple Choice

Winter Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are listed as follows:
$\begin{array}{lr}\text { Maintenance } & \$ 255,000 \\\text { Materials handling } & 125,000 \\\text { Setups } & 30,000 \\\text { Inspection } & 105,000\end{array}$ Currently,overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours; 100,000 direct labour hours are budgeted for next year.
The company has been asked to submit a bid for a proposed job.The plant manager feels that obtaining this job would result in new business in future years.Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
$\begin{array}{lr}\text { Direct materials } & \$ 15,000 \\\text { Direct labour (8,000 hours) } & \$ 12,000 \\\text { Number of material moves } & 100 \\\text { Number of inspections } & 120 \\\text { Number of setups } & 24 \\\text { Number of machine hours } & 4,000\end{array}$ The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers.Expected activity for the four activity drivers that would be used are:
$\begin{array}{lr}\text { Machine hours } & 60,000 \\\text { Material moves } & 20,000 \\\text { Setups } & 3,000 \\\text { Quality inspections } & 12,000\end{array}$
-Refer to the figure.What is the total cost of the proposed job if Winter Manufacturing uses direct labour hours as its only activity driver?

• A)$53,200
• B)$56,200
• C)$68,200
• D)$72,000

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