Bender Automotive Works Inc. manufactures a variety of front-end assemblies for automobiles. A front-end assembly is the unified front of an automobile that includes the headlamps, fender, and surrounding metal/plastic. Bender has two producing departments: Drilling and Assembly. Usually, the front-end assemblies are ordered in batches of 100. Two support departments provide support for Bender's producing departments: Maintenance and Power. Budgeted data for the coming quarter follow. The company does not separate fixed and variable costs. Support Departments Producing Departments Assembly $ 90,000 7,500 324,000 Maintenance Power Drilling Overhead costs $320,000 $400,000 $163,000 30,000 36,000 5,000 Machine hours Kilowatt-hours 22,500 40,000 Direct labor hours 40,000 The predetermined overhead rate for Drilling is computed on the basis of machine hours. Direct labor hours are used for Assembly. Recently, a truck manufacturer requested a bid on a 3-year contract that would supply front-end assemblies to a nearby factory. The prime costs for a batch of 100 front-end assemblies are $1,817. It takes two machine hours to produce a batch in the drilling department and 50 direct labor hours to assemble the 100 front-end assemblies in the assembly department. Bender's policy is to bid full manufacturing cost, plus 15%. (Note: Round allocation ratios to four decimal places, allocated support department cost to the nearest dollar, and the job cost components to the nearest cent.) Required: 1. Prepare bids for Bender by using each of the following allocation methods: (a) direct method and (b) sequential method, allocating power costs first. (Note: Round allocation ratios to four decimal places, allocated support department cost to the nearest dollar, and the job cost components to the nearest cent.) 2. CONCEPTUAL CONNECTION Which method most accurately reflects the cost of producing the front-end assemblies? Why?
Bender Automotive Works Inc. manufactures a variety of front-end assemblies for automobiles. A front-end assembly is the unified front of an automobile that includes the headlamps, fender, and surrounding metal/plastic. Bender has two producing departments: Drilling and Assembly. Usually, the front-end assemblies are ordered in batches of 100. Two support departments provide support for Bender's producing departments: Maintenance and Power. Budgeted data for the coming quarter follow. The company does not separate fixed and variable costs. Support Departments Producing Departments Assembly $ 90,000 7,500 324,000 Maintenance Power Drilling Overhead costs $320,000 $400,000 $163,000 30,000 36,000 5,000 Machine hours Kilowatt-hours 22,500 40,000 Direct labor hours 40,000 The predetermined overhead rate for Drilling is computed on the basis of machine hours. Direct labor hours are used for Assembly. Recently, a truck manufacturer requested a bid on a 3-year contract that would supply front-end assemblies to a nearby factory. The prime costs for a batch of 100 front-end assemblies are $1,817. It takes two machine hours to produce a batch in the drilling department and 50 direct labor hours to assemble the 100 front-end assemblies in the assembly department. Bender's policy is to bid full manufacturing cost, plus 15%. (Note: Round allocation ratios to four decimal places, allocated support department cost to the nearest dollar, and the job cost components to the nearest cent.) Required: 1. Prepare bids for Bender by using each of the following allocation methods: (a) direct method and (b) sequential method, allocating power costs first. (Note: Round allocation ratios to four decimal places, allocated support department cost to the nearest dollar, and the job cost components to the nearest cent.) 2. CONCEPTUAL CONNECTION Which method most accurately reflects the cost of producing the front-end assemblies? Why?
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter19: Support Department And Joint Cost Allocation
Section: Chapter Questions
Problem 2CMA: Adam Corporation manufactures computer tables and has the following budgeted indirect manufacturing...
Related questions
Question
How do i identify and explain the most accurate method for direct and step down method?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 14 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub