Score: 0.07 of 1 pt 1 of 4 V Test Score: 1.85%, 0.07 of 4 pts & E19-22 (similar

Question

Score: 0.07 of 1 pt 1 of 4 V Test Score: 1.85%, 0.07 of 4 pts & E19-22 (similar to) ts ork Drab Dog Collars uses activity-based costing. Drab's system has the following features: E(cick the icon to view the data table.) Test direct matertals cost 5s s6. 00 per collr. and airect labor cost is S4 00 per collar Suppose Animal Hut has asked or a bia on 40,000 dog collars. Drab will issue a total of 150 purchase orders if Animal Hut accepts Drab's bid. Read the requirements Hut has asked for a bid kequirement s. suppose tnat insteaa or an ABC System, urap direct materials and direct labor at the rate of $9.40 per direct labor hour. The dog collar order will require 11,000 direct labor hours. What will Drab bid using this system's total cost? nas a traationai proauct costing system nat alocates ina total price Begin by calculating the total manufacturing cost using the traditional product costing system. (Round to the nearest dollar. If a box is not used in the table leave the box empty, do not select a label or enter a zero.) Direct materials Direct labor Total mfg. OH cost 240,000 160,000 103,400 Move your pointer over or tap on the cells with red arrows to see incorrect answers 2

Explanation / Answer

Calculation of total manufacturing overhead:

Basis of allocating manufacturing overhead = Direct labor hours

a. Number of direct labor hours required to fulfill the order = 11,000 direct labor hours

b. Indirect cost allocation per direct labor hour = $9.40

Therefore indirect cost or manufacturing overhead for 11,000 labor hours = a x b = $103,400

Calculation of Total cost of 40,000 collars:

Under traditional costing system, Mr. drab shall bid more than or equal to $503,400.

Amount a. Direct material [40,000 collars x $6] $240,000 b. Direct labor [40,000 collars x $4] $160,000 c. Total manufacturing overhead cost [11,000 labor hours x $9.40] $103,400 Total Manufacrturig cost [a + b + c] $503,400 Profit margin xxx Total bid price XXXXX

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