Using the direct method and step down method, identify which method is more accurate in producing the front end assemblies. Using the figure and justify why the method is more accurate. Bender Automotive Works Inc. manufactures a variety of front-end assemblies for automobiles. A front-end assembly is theunified front of an automobile that includes the headlamps, fender, and surrounding metal/plastic. Bender has twoproducing 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 datafor the coming quarter follow. The company does not separate fixed and variable costs.Support DepartmentsProducing DepartmentsAssembly$ 90,000MaintenancePowerDrillingOverhead costs$320,000$400,000$163,000Machine hours22,500Kilowatt-hoursDirect labor hours30,00036,0005,0007,500324,00040,00040,000The predetermined overhead rate for Drilling is computed on the basis of machine hours. Direct labor hours are used forAssembly.Recently, a truck manufacturer requested a bid on a 3-year contract that would supply front-end assemblies to a nearbyfactory. The prime costs for a batch of 100 front-end assemblies are $1,817. It takes two machine hours to produce a batchin the drilling department and 50 direct labor hours to assemble the 100 front-end assemblies in the assemblydepartment.Bender's policy is to bid full manufacturing cost, plus 15%. (Note: Round allocation ratios to four decimal places, allocatedsupport department cost to the nearest dollar, and the job cost components to the nearest cent.)

Allocation of Maintenance cost to drilling (Direct method)=$320,000×30,00030,000+7,500=$256,000…

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 Maintenance Power Drilling Assembly Overhead costs $320,000 $400,000 $ 90,000 $163,000 30,000 36,000 5,000 Machine hours 22,500 7,500 324,000 Kilowatt-hours Direct labor hours 40,000 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.)

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter9: Evaluating Variances From Standard Costs

Section: Chapter Questions

Problem 3E: Salisbury Bottle Company manufactures plastic two-liter bottles for the beverage industry. The cost...