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"Don't tell me we've lost another bidl" exclaimed Janice Hudson, president of Prime Products Inc. "I'm afraid so," replied Doug Martin, the operations vice president. "One of our competitors underbid us by about $10,000 on the Hastings job." "I just can't figure it out." said Hudson. "It seems we're either too high to get the job or too low to make any money on half the jobs we bid. What's happened?" Prime Products manufactures specialized goods to customers' specifications and operates a job order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labour cost. The following estimates were made at the beginning of the year Department Direct labour Manufacturing overhead Cutting 5.301,500 $ 542,700 Machining Assembly $ 201,000 $ 402,000 $ 804,000 $100, 500 Total Plant $ 994,500 $1,447,200 Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufacturing costs in the three departments as follows: Department Direct material Direct labour Manufacturing overhead Cutting $ 12,800 $ 7,000 2 Machining $1,000 $ 1,900 > Assembly $ 5,800 $ 13,600 > Total Plant $ 19,600 $ 22,500 ? The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs. 4. Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labour, and applied overhead) a. What was the company's bid price on the Hastings job? Answer is complete but not entirely correct. Company's bld price $ 63,152 b. What would the bid price have been if departmental overhead rates had been used to apply overhead cost? Answer is complete but not entirely correct. Company's bid $ 63,159 price 5. At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year Cutting $764,500 $322,000 $563,500 Department Machining Assembly $ 90,500 $412,000 $ 211,500 $341,600 $835,900 $ 92,400 Direct material Direct labour Manufacturing overhead Total Plant $1,267,000 $875, 100 $1,491,800 a. Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used. b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used

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