Western Component Case Solution
By: faltuhaiye1 • December 16, 2014 • Essay • 875 Words (4 Pages) • 1,532 Views
Western Components, Inc.*
Questions:
1. Calculate the full cost of the job for Husanti Industries using the current approach to allocating overhead. What would be the bid assuming it is 125% of production costs?
Annual Production Overhead $ 23,800,000.00
Annual Machine Hours $ 700,000.00
Labor Hours $ 2,000.00
Machine hours $ 8,000.00
Direct Material $ 185,000.00
Labor cost per hour $ 22.00
Standard Overhead Rate $ 34.00
Bid Value of Cost 125%
Costs
Labor Hours $ 44,000.00
Machine hours $ 272,000.00
Direct Material $ 185,000.00
Total Value $ 501,000.00
Bid Value $ 626,250.00
2. To prevent jobs from being burdened with the "cost of excess capacity," suppose the company decides to allocate overhead using its practical capacity of 1,000,000 machine hours. How will this change the full cost of the job for Husanti Industries? What would be the bid assuming it is priced at 125% of this revised measure of production costs?
Annual Production Overhead $ 23,800,000.00
Annual Machine Hours $ 1,000,000.00
Labor Hours $ 2,000.00
Machine hours $ 8,000.00
Direct Material $ 185,000.00
Labor cost per hour $ 22.00
Standard Overhead Rate $ 23.80
Bid Value of Cost 125%
Costs
Labor Hours $ 44,000.00
Machine hours $ 190,400.00
Direct Material $ 185,000.00
Total Value $ 419,400.00
Bid Value $ 524,250.00
3. Assume you have been assigned to assist Sally Jones. Prepare an analysis
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