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

question 24

Multiple Choice

Spear Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows:
$\begin{array}{lr}\text { Maintenance } & \$ 180,000 \\\text { Materials handling } & 27,000 \\\text { Setups } & 24,000 \\\text { Inspection } & 90,000\end{array}$
Currently,overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours; 20,000 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 15 percent.Estimates for the proposed job are as follows:
$\begin{array}{lr}\text { Direct materials } & \$ 3,000 \\\text { Direct labour ( } 600 \text { hours) } & \$ 9,000 \\\text { Number of material moves } & 4 \\\text { Number of inspections } & 6 \\\text { Number of setups } & 80 \\\text { Number of machine hours } & 8\end{array}$
In the past,full manufacturing cost has been calculated by allocating overhead using a volume-based activity driver,direct labour hours.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:
$\begin{array}{llr} \text {Machine hours } &5,000\\ \text { Material moves } &600\\ \text { Setups } &200\\ \text { Quality inspections } &1,000\end{array}$

-Refer to the figure.If material moves are used to assign material handling costs,what would be the amount of material handling costs allocated to the proposed job?

• A)$60
• B)$147
• C)$170
• D)$180

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Definitions:

Competencies Framework

A structured model that outlines the skills, knowledge, behaviors, and other qualities required to perform certain tasks effectively within an organization.

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the benefit (return) of an investment by the cost of the investment.

Training Program

A structured plan of activities and instructions designed to achieve specific learning goals and improve participants' skills and knowledge.

Corporate Learning Philosophy

An organization’s approach and attitude towards employee development, emphasizing the importance of continuous learning and skill enhancement.