Indianapolis Auto Parts (IAP) has a Seat Assembly Department that uses activity-based costing. IAP's system has...

 

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Indianapolis Auto Parts (IAP) has a Seat Assembly Department that uses activity-based costing. IAP's system has the following activities: (Click the icon to view the activities.) Each baby seat has 20 parts. Direct materials cost per seat is $15. Direct labor cost per seat is $10. Suppose an automobile manufacturer has asked IAP for a bid on 50,000 built-in baby seats that would be installed as an option on its SUVS. IAP will use a total of 200 purchase orders if the bid is accepted. Read the requirements. Requirement 1. Compute the total cost IAP will incur to (a) purchase the needed materials and then (b) assemble and (c) package 50,000 baby seats. Also, compute the average cost per seat (Round the average cost per seat to the nearest cont.) Direct labor Direct materials Activity costs: Purchasing Assembling Packaging Total cost of order Divide by Average cost per seat Requirement 2. For bidding, IAP adds a 30% markup to total cost. What total price will IAP bid for the entire order? IAP will bid for the entire order. Requirement 3. Suppose that instead of an ABC system, IAP has a traditional product costing system that allocates indirect costs at the rate of $65 per direct labor hour. The baby seat order will require 10.000 direct labor hours. What price will IAP bid using this system's total cost assuming a 30% markup to total cost? First, compute the total cost of the order using a traditional product costing system. Total cost of order IAP will bid using this system's total cost assuming a 30% markup to total cost Requirement 4. Use your answers to Requirements 2 and 3 to explain how ABC can help IAP make a better decision about the bid price. IAP's bid would be $ using the traditional system than using ABC. Assuming the ABC system more accurately captures the costs caused by the order, the traditional system bid price and chance of winning the order by bidding a IAP's chance of winning the order. The ABC system can the order. This leads to a price. IAP's Allocation Base Cost Allocation Rate Number of purchase orders $50.00 per purchase order $0.50 per part $1.00 per finished seat Activity Purchasing Assembling Number of parts Packaging Number of finished seats Indianapolis Auto Parts (IAP) has a Seat Assembly Department that uses activity-based costing. IAP's system has the following activities: (Click the icon to view the activities.) Each baby seat has 20 parts. Direct materials cost per seat is $15. Direct labor cost per seat is $10. Suppose an automobile manufacturer has asked IAP for a bid on 50,000 built-in baby seats that would be installed as an option on its SUVS. IAP will use a total of 200 purchase orders if the bid is accepted. Read the requirements. Requirement 1. Compute the total cost IAP will incur to (a) purchase the needed materials and then (b) assemble and (c) package 50,000 baby seats. Also, compute the average cost per seat (Round the average cost per seat to the nearest cont.) Direct labor Direct materials Activity costs: Purchasing Assembling Packaging Total cost of order Divide by Average cost per seat Requirement 2. For bidding, IAP adds a 30% markup to total cost. What total price will IAP bid for the entire order? IAP will bid for the entire order. Requirement 3. Suppose that instead of an ABC system, IAP has a traditional product costing system that allocates indirect costs at the rate of $65 per direct labor hour. The baby seat order will require 10.000 direct labor hours. What price will IAP bid using this system's total cost assuming a 30% markup to total cost? First, compute the total cost of the order using a traditional product costing system. Total cost of order IAP will bid using this system's total cost assuming a 30% markup to total cost Requirement 4. Use your answers to Requirements 2 and 3 to explain how ABC can help IAP make a better decision about the bid price. IAP's bid would be $ using the traditional system than using ABC. Assuming the ABC system more accurately captures the costs caused by the order, the traditional system bid price and chance of winning the order by bidding a IAP's chance of winning the order. The ABC system can the order. This leads to a price. IAP's Allocation Base Cost Allocation Rate Number of purchase orders $50.00 per purchase order $0.50 per part $1.00 per finished seat Activity Purchasing Assembling Number of parts Packaging Number of finished seats

Answer rating: 100% (QA)

1 Total cost of order Direct material cost Direct Labor cost Purchasing Assembly Packaging cost Aver... View the full answer