Solved: Firenza Company manufactures specialty tools to

customer order Budgeted overhead

Firenza Company manufactures specialty tools to customer order Budgeted overhead

Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the
coming year is:

Purchasing ...... $40,000

Setups .......... 37,500

Engineering ...... 45,000

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
read- ing 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 set- ups, and 2,500 engineering hours.

Sanjay has been asked to prepare bids for two jobs with the following information:

The typical bid price includes a 40 percent markup over full manufacturing cost.

Required:

1. Calculate a plantwide rate for Firenza Company based on machine hours. What is the bid
price of each job using this rate?

2. Calculate activity rates for the four overhead activities. What is the bid price of each job using
these rates?

3. Which bids are more accurate? Why?

Reach out to freelance2040@yahoo.com for enquiry.

 Firenza Company manufactures specialty tools to customer order Budgeted overhead

ANSWER
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budgeted-overhead/

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