Don’t tell me we’ve lost another bid!” exclaimed Janice Hudson, president of Prime Products Inc. “I’m afraid so,” replie

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Don’t tell me we’ve lost another bid!” exclaimed Janice Hudson,president of Prime Products Inc. “I’m afraid so,” replied DougMartin, the operations vice president. “One of our competitorsunderbid us by about $12,000 on the Hastings job.” “I just can’tfigure it out,” said Hudson. “It seems we’re either too high to getthe job or too low to make any money on half the jobs we bid.What’s happened?”
Prime Products manufactures specialized goods to customers’specifications and operates a job-order costing system.Manufacturing overhead cost is applied to jobs on the basis ofdirect labour cost. The following estimates were made at thebeginning of the year:
Jobs require varying amounts of work in the three departments.The Hastings job, for example, would have required manufacturingcosts in the three departments as follows:
The company uses a plantwide overhead rate to applymanufacturing overhead cost to jobs.
Required:
1. Assuming the use of a plantwideoverhead rate:
a. Compute the ratefor the current year.
Predetermined overheadrate:
b. Determine theamount of manufacturing overhead cost that would have been appliedto the Hastings job.
Manufacturing overheadcost:
2. Suppose that instead of using aplantwide overhead rate, the company had used a separatepredetermined overhead rate in each department. Under theseconditions:
a. Compute the ratefor each department for the current year.
b. Determine theamount of manufacturing overhead cost that would have been appliedto the Hastings job.
Manufacturingoverhead cost:
3. This part of the question is not partof your Connect assignment.
4. Assume that it is customary in theindustry to bid jobs at 140% of total manufacturing cost (directmaterials, direct labour, and applied overhead).
a. What was thecompany’s bid price on the Hastings job?
Company`s bidprice:
b. What would thebid price have been if departmental overhead rates had been used toapply overhead cost?
Company`s bid price:
5. At the end of the year, the companyassembled the following actual cost datarelating to all jobs worked on during the year:
a. Compute the underapplied oroverapplied overhead for the year, assuming that a plantwideoverhead rate is used.
b. Compute the underapplied oroverapplied overhead for the year, assuming that departmentaloverhead rates are used.