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3-46 Job bid price, direct, sequential, and reciprocal allocations

3-46 Job bid price, direct, sequential, and reciprocal allocations
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Solution Guide / Answer Key:

Management Accounting (Atkinson), 5th Edition
3-46 (Job bid price, direct, sequential, and reciprocal allocations) Small Pump Manufacturer Service Departments Production Departments Item Maintenance Power Casting Assembly Support Costs $750,000 $450,000 $150,000 $110,000 Machine Hours 0 80000 80000 40000 Kilowatt-hours 40000 0 200000 160000 Direct Labor Hours 0 0 100000 60000 Management allocates maintenance department costs using machine hours Management allocates power deptepartment costs using kilowatt hours Separate cost driver rates are determined on machine hours basis for casting dept and on direct labor hours basis for assembly dept 1 machine hour per pump manufacture in casting department .5 labor hours to assemble pump in assembly dept Direct labor and material costs = $32.00 per pump Potential Sell: 2 year contract to purchase 1000 pumps every month Add 25% markup to full manufacturing cost to determine bid BID PRICE for. a) Direct Method b) Sequential Method begins by allocating maintenance department costs c) Reciprocal Method



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