K Austin Auto Parts (AAP) has a Seat Manufacturing Department that uses ABC. AAP's activity cost...

Transcribed Image Text:

K Austin Auto Parts (AAP) has a Seat Manufacturing Department that uses ABC. AAP's activity cost allocation rates include the following: (Click on the icon to view ABC system data.) Suppose Ford has asked for a bid on 29,000 built-in baby seats that would be installed as an option on some Ford SUVs. Each seat has 17 parts and the direct materials cost per seat is $15. The job would require 12,000 direct labor hours at a labor wage rate of $17 per hour. In addition, AAP will use a total of 300 machine hours to fabricate some of the parts required for the seats. Total cost of order Divide by number of seats Average cost per seat $ $ 1,015,000 29,000 35.00 Requirement 2. For bidding, AAP adds a 20% markup to total cost. What price will the company bid for the Ford order? Begin by determining the formula to calculate the price the company will bid for the Ford order. Total cost of order x 120% = Bid price The company will bid $ 1,218,000 for the Ford order. Requirement 3. Suppose that instead of an ABC system, AAP has a traditional product costing system that allocates manufacturing overhead at a plantwide overhead rate of $70 per direct labor hour. The baby seat order will require 12,000 direct labor hours. Calculate the total cost of producing the baby seats and the average cost per seat. What price will AAP bid using this system's total cost? Begin by calculating the total cost of producing the baby seats and the average cost per seat. (Round the average cost per seat to the nearest cent.) Direct materials Direct labor Manufacturing overhead Total cost of order Divide by number of seats Average cost per seat Data table Activity Machining Assembling Packaging Allocation Base Number of machine hours Number of parts Number of finished seats Activity Cost Allocation Rate $45.00 per machine hour 0.70 per part 0.60 per finished seat K Austin Auto Parts (AAP) has a Seat Manufacturing Department that uses ABC. AAP's activity cost allocation rates include the following: (Click on the icon to view ABC system data.) Suppose Ford has asked for a bid on 29,000 built-in baby seats that would be installed as an option on some Ford SUVs. Each seat has 17 parts and the direct materials cost per seat is $15. The job would require 12,000 direct labor hours at a labor wage rate of $17 per hour. In addition, AAP will use a total of 300 machine hours to fabricate some of the parts required for the seats. Total cost of order Divide by number of seats Average cost per seat $ $ 1,015,000 29,000 35.00 Requirement 2. For bidding, AAP adds a 20% markup to total cost. What price will the company bid for the Ford order? Begin by determining the formula to calculate the price the company will bid for the Ford order. Total cost of order x 120% = Bid price The company will bid $ 1,218,000 for the Ford order. Requirement 3. Suppose that instead of an ABC system, AAP has a traditional product costing system that allocates manufacturing overhead at a plantwide overhead rate of $70 per direct labor hour. The baby seat order will require 12,000 direct labor hours. Calculate the total cost of producing the baby seats and the average cost per seat. What price will AAP bid using this system's total cost? Begin by calculating the total cost of producing the baby seats and the average cost per seat. (Round the average cost per seat to the nearest cent.) Direct materials Direct labor Manufacturing overhead Total cost of order Divide by number of seats Average cost per seat Data table Activity Machining Assembling Packaging Allocation Base Number of machine hours Number of parts Number of finished seats Activity Cost Allocation Rate $45.00 per machine hour 0.70 per part 0.60 per finished seat