Southwest Auto Parts has a Seat Manufacturing Department that uses activity-based costing. SOUTHWEST\u2019s system has the following activities:<\/p>\n
Activity<\/p>\n
Allocation Base<\/p>\n
Cost Allocation Rate<\/p>\n
Purchasing<\/p>\n
Number of purchase orders<\/p>\n
$50.00 per purchase order<\/p>\n
Assembling<\/p>\n
Number of parts<\/p>\n
$0.50 per part<\/p>\n
Packaging<\/p>\n
Number of finished seats<\/p>\n
$1.00 per finished seat<\/p>\n
Each auto seat has 20 parts. Direct materials cost per seat is $1. Direct labor cost per seat is $10. Suppose Lexus RX300 has asked SOUTHWEST for a bid on 50,000 built-in baby seats that would be installed as an option on some Lexus RX300. SOUTHWEST will use a total of 200 purchase orders if Lexus RX300 accepts SOUTHWEST\u2019s bid.<\/p>\n
Requirements<\/p>\n
1. Compute the total cost SOUTHWEST will incur to (a) purchase the needed materials and then (b) assemble and (c) package 50,000 baby seats. Also, compute the average cost per seat.<\/p>\n
2. For bidding, SOUTHWEST adds a 30% markup to total cost. What total price will SOUTHWEST bid for the entire Lexus RX300 order?<\/p>\n
3. Suppose that instead of an ABC system, SOUTHWEST has a traditional product costing system that allocates indirect costs other than direct materials and direct labor at the rate of $65 per direct labor hour. The baby-seat order will require 10,000 direct labor hours. What price will SOUTHWEST bid using this system\u2019s total cost?<\/p>\n
4. Use your answers to Requirements 2 and 3 to explain how ABC can help SOUTHWEST make a better decision about the bid price to offer Lexus RX300.<\/p>\n","protected":false},"excerpt":{"rendered":"
Southwest Auto Parts has a Seat Manufacturing Department that uses activity-based costing. SOUTHWEST\u2019s system has the following activities: Activity Allocation Base Cost Allocation Rate Purchasing Number of purchase orders $50.00 per purchase order Assembling Number of parts $0.50 per part Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-27475","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/27475","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=27475"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/27475\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=27475"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=27475"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=27475"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}