#3. options are Activity based costing or Traditional costing using machine hours

Overhead Application, Activity-Based Costing, Bid Prices Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is: Purchasing $40,000 Setups 37,500 Engineering 50,000 Other 40,000 Previously, Sanjay Bhatt, Firenza Company's controller, had applied overhead on the basis of machine hours. Expected machine hours for the coming year are 50,000. Sanjay has been reading about activity-based costing, and he wonders whether or not it might offer some advantages to his company. He decided that appropriate drivers for overhead activities are purchase orders for purchasing, number of setups for setup cost, engineering hours for engineering cost, and machine hours for other. Budgeted amounts for these drivers are 5,000 purchase orders, 500 setups, and 2,500 engineering hours. Sanjay has been asked to prepare bids for two jobs with the following information: Job 1 Job 2 Direct materials $4,600 $9,340 hs Direct labor $1,200 $2,100 15 20 Number of purchase orders 3 4 Number of setups 45 10 Number of engineering hours S-talse Number of setups 3 4 Number of engineering hours 45 10 Number of machine hours 200 200 The typical bid price includes a 40 percent markup over full manufacturing cost. Required: Note: When required, round your answers to the nearest cent. 1. Calculate a plantwide rate for Firenza Company based on machine hours. per machine hour What is the bid price of each job using this rate? Bid Price Job 1 Job 2 2. Calculate activity rates for the four overhead activities. Purchasing rate $ per purchase order Setup cost rate $ per setup Engineering rate $ per engineering hour Other cost rate $ per machine hour chprogress=false 1- Calculate a piam LVIDO TALTenizcompany wascuaTVITETIIS. $ per machine hour What is the bid price of each job using this rate? Bid Price Job 1 $ Job 2 $ 2. Calculate activity rates for the four overhead activities. Purchasing rate $ per purchase order Setup cost rate $ per setup Engineering rate $ per engineering hour Other cost rate $ per machine hour What is the bid price of each job using these rates? Bid Price Job 1 $ Job 2 $ 3. Which bids are more accurate? What is the bid price of each job using these rates? Bid Price Activity based costing Traditional costing using machine hours Droo