Business, 10.12.2021 02:00, conner87

Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is: Purchasing $35,000
Setups 40,000
Engineering 50,000
Other 40,000

Previously, Sanjay Bhatt, Firenza Company's controller, had applied overhead on the basis of machine hours. Expected machine hours for the coming year are 50,000. Sanjay has been reading about activity-based costing, and he wonders whether or not it might offer some advantages to his company. He decided that appropriate drivers for overhead activities are purchase orders for purchasing, number of setups for setup cost, engineering hours for engineering cost, and machine hours for other. Budgeted amounts for these drivers are 5,000 purchase orders, 500 setups, and 2,500 engineering hours.

Required:
a. Calculate a plantwide rate for Firenza Company based on machine hours. What is the bid price of each job using this rate?
b. Calculate activity rates for the four overhead activities. What is the bid price of each job using these rates?
c. Which bids are more accurate? Why?

Answers: 2

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Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming yea...