Felix Corporation has four activities with the following costs: Machining $300,0

Question

Felix Corporation has four activities with the following costs: Machining $300,000 Materials handling 225,000 Assembling 150,000 Inspection 150,000 Felix uses an activity-based costing system and has provided the following levels for the four cost drivers: Machine hours 60,000 Material moves 15,000 Parts 18,758 Quality inspections 30,000 The cost drivers for machining, materials handling, assembling, and inspection are, respectively; machine hours, material moves, parts, and quality inspections. The company has been asked to submit a bid for a proposed job. Estimates for the job are as follows: Direct materials $42,000 Number of material moves 22 Number of inspections 42 Number of machine hours 78 Number of parts 60 a) Determine the total indirect costs for this job b) Determine the total manufacturing costs for this job c) Determine the company's bid if the bid is based upon total manufacturing costs plus 30

Explanation / Answer

Solution:

b) Total manufacturing cost for the job = Direct material + Indirect overhead = $42,000 + $1,410 = $43,410

c) Company's bid considering 30% margin on manufacturing cost = $43,410 * 130% = $56,433

Computation of allocation rate of activity cost & indirect cost of proposed job Activity Allocation Base Qty Indirect Cost Allocation Rate Qty of activities in proposed job Indirect cost - Proposed Job Machining Machine hours 60000 300000 $5.00 78 $390.00 Material handling Material Moves 15000 225000 $15.00 22 $330.00 Assembling Parts 18750 150000 $8.00 60 $480.00 Inspection Quality Inspections 30000 150000 $5.00 42 $210.00 Total $1,410.00

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