Compare bid prices under two different allocation bases (Learning Objectives 2, 4) Middleton Recycling recycles newsprint, cardboard, and so forth, into recycled pack¬ aging materials. For the coming year, Middleton Recycling estimates total manufac¬ turing overhead to be $360,000. The company’s managers are not sure if direct labor hours (estimated to be 10,000) or machine hours (estimated to be 15,000 hours) is the best allocation base to use for allocating manufacturing overhead. Middleton Recycling bids for jobs using a 30% markup over total manufacturing cost.

After the new fiscal year began, Wisconsin Paper Supply asked Middleton recy¬ cling to bid for a job that will take 2,000 machine hours and 1,600 direct labor hours to produce. The direct labor cost for this job will be $12 per hour, and the direct mate¬ rials will total $25,000.

1. Compute the total job cost and bid price if Middleton Recycling decided to use direct labor hours as the manufacturing overhead allocation base for the year.
2. Compute the total job cost and bid price if Middleton Recycling decided to use machine hours as the manufacturing overhead allocation base for the year.
3. In addition to the bid from Middleton Recycling, Wisconsin Paper Supply received a bid of $125,000 for this job from Sun Prairie Recycling. What are the ramifications for Middleton Recycling?