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In: AccountingChallenge 2: Job-Order Costing for Customized WorkBased on your advice, High-End Lifts has moved forward...Challenge 2: Job-Order Costing for Customized WorkBased on your advice, High-End Lifts has moved forward andset up the production process to build all of its residentialelevators in-house. In the past, High-End Lifts utilized the costestimates provided by the production company as the basis forquoting prices to its residential customers and did not bear therisk of cost overruns or manufacturing delays. Now that they aremanufacturing products, they need a more sophisticated system forestimating costs, bidding on jobs, and tracking actuals againstbudgeted costs for planning and control purposes. They’ve asked foryour help in setting up a system to quote and track the cost ofcustom jobs that are received for custom projects. You’verecommended the use of a job order costing system since each job isbudgeted and track based on customized specifications.Suggested Preparation: Use the Challenge 2 Workbook (foundin "Resources") to complete the definitions related to the jobordering costing. Watch the videos to gain a strongerunderstanding of the concepts.Task 1: Calculate a predetermined overhead application rateusing budgeted direct-labor hours as the cost driver. High-EndLifts uses a volume-based, plant-wide approach to allocatingoverhead. They use direct-labor hours as the cost driver fordetermining the budgeted rate.Task 2: High-End Lifts received a request for proposal (RFP#240A) from Top Quality Builders, Inc. to manufacturer 6custom-sized elevators for a small condominium project in LakeBonaventure, NY for delivery on 10-1-18 (installation is notrequired). High-End Lifts has the in-house capacity to complete thejob without incurring additional overhead costs.Required:1) Determine the price and bid the job as specified in theRFP #240A. The RFP has specified that the bid includethe cost of delivering the units to the construction site.High-End Lifts, Inc. has estimated that the delivery expense forthe six elevators including insurance while in transit, is $1,500.This amount will be figured into the total cost of the bid, afteraccounting for the mark-up on cost. High-EndLifts, Inc. is aware that one of its competitiorsis also bidding on the job. To compete, High-End Lifts wants toprice the job at 40% gross margin rather than their standard 50% onthe regular product line-up. Standard limited warranty on allHigh-End elevators is 5 years, parts and labor related to all powerand hydraulic lift components.These elevators are slightly larger than the residentialelevators they normally build and based on their estimates, theseunits will require 10% more in direct materialsand 15% more in direct labor hours than their standardelevators. THe standard costs on the regularelevators are $55,000 for direct materials and $68,750 for directlabor which is based on an average of 400 hours per elevator. Forthe new units, manufacturing overhead will be budgeted using thepre-determined overhead rate calcualted in Task#1. For pricing the job, High-End Lifts will use the pre-determinedoverhead rate x the budgeted direct labor hours for thejob.2) They've asked you to help write a proposal to bid on thejob. Draft a proposal letter to Mike Bower at Top Quality Builders,Inc., 100 West 1st Street, Oswego, NY. In the letter, write a briefsummary of the company, High-End Lifts, Inc.,what you want to help the prospect accomplish, a timeline forgetting the work done, pricing, warranty informationand contact information. High-End Lifts, Inc. islocated at 1001 James Street, Syracuse, NY 13111, the CEOs name isSkylar Cab, and the business cell number is 315-555-1234.I need help with task 2. Here is the information from task 1,completed.TASK #1 PDOHRHIGH-END LIFTSBUDGETED MOH 57,333Depreciation on PP&E 48,000Property Taxes 32,777Utilities 65,000Insurance 117,200Indirect labor & benefits 53,140Indirect materials 373,450TOTAL BUDGETED MOHBUDGETED DIRECT LABORHOURS$ 1,890,625TOTAL BUDGETED COST OF DL ($68,750 x 27.5 units) 11,000TOTAL BUDGETED DL HOURS: 27.5 units x 5 workers x 2 weeks x 40hours per week (400 hours per elevator).$ 171.88DL$ per hourPREDETERMINED MOH RATE$ 373,450TOTAL BUDGETED MOH 11,000TOTAL BUDGETED DL HOURS$ 33.95Predetermined MOH Rate per DLH = TotalBudgeted MOH / Total Budgeted DLH