Question

Wellington Recycling recycles newsprint, cardboard, etc. into recycled packaging materials.
For the coming year, Wellington Recycling estimates total manufacturing overhead to be $360,360. The company’s managers are not sure if direct labour hours (estimated to be 10,010) or machine hours (estimated to be 18,018 hours) is the best allocation base to use for allocating manufacturing overhead. Wellington Recycling bids for jobs using a 29% markup over total manufacturing cost. After the new fiscal year began, Lundy Paper Supply asked Wellington Recycling to bid for a job that will take 1,995 machine hours and 1,750 direct labour hours to produce. The direct labour cost for this job will be $12 per hour, and the direct materials will total $25,400.
1. Compute the total job cost and bid price if Wellington Recycling decided to use direct labour hours as the manufacturing overhead allocation base for the year.
2. Compute the total job cost and bid price if Wellington Recycling decided to use machine hours as the manufacturing overhead allocation base for the year.
3. In addition to the bid from Wellington Recycling, Lundy Paper Supply received a bid of $124,500 for this job from Kearns Recycling. What are the ramifications for Wellington Recycling?


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  • CreatedApril 30, 2015
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