Conquest Machining Ltd

question 152

Essay

Conquest Machining Ltd.is a manufacturer of precision hand tools,is concerned with the apparent lack of controls over cost incurrence in its Pliers Division.The division has always used a plant-wide rate for allocating manufacturing overhead to its products.However,some products cost substantially more than competitors retail prices while others are substantially less.The division manager believes that a better cost allocation method can be developed.
With the assistance of a plant supervisor,the accounting department has been able to establish the following relationships between production activities and the indirect costs of the activities:

The traditional allocation method is based upon direct manufacturing labour hours,and if that method is used the rate is $28 per hour.
Required:
Compute the unit indirect manufacturing costs of a batch of 200 tools if the batch required 220 parts,8 machine hours,52 minutes of finishing time,and 46 direct labour hours:

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Definitions:

Second Order

An additional request or transaction following an initial one, often implying a follow-up or repeat business.

Total Order

Total order is the complete quantity of goods or services requested by a customer at a particular time.

Demand Pattern

The trend or tendency of buyers purchasing certain quantities of a product at various times.

Overstock

Occurs when a company holds more inventory than it can sell, potentially leading to high holding costs and reduced profitability.