Jenny’s Painting Company paints and power-washes for industrial and residential customers. The company currently charges all overhead out on direct labor hours but is considering making changes because it has not been as competitive on painting jobs as it would like. The following is the information for the company.

Jenny has recently been asked to bid on the following three jobs:

REQUIRED:

a. Develop a plant-wide overhead rate using direct labor hours. Do not forget to include the general overhead in your calculations.

b. Using this direct labor- based overhead rate, complete the bid for the three jobs Jenny is considering by adding in overhead.

c. Now develop a plant-wide rate using machine hours as the driver.

d. Use this machine hour- based overhead rate to attach overhead costs to the three jobs.

e. Next, develop three charging rates: General Overhead on direct labor hours, Painting on its own direct labor hours, and Power Washing on machine hours.

f. Use these three rates to re- cost the jobs. What is their new cost?

g. Which approach is better? Why?

Transcribed Image Text:

Jenny's Painting Company Painting Power Washing General Overhead Overhead $40,000 $150,000 $50,000 Direct labor hours 24,000 6,000 NA Machine hours 2,000 10,000 NA