Question

Joni's Kitty Supplies applies manufacturing overhead costs to products at a budgeted indirect - cost rate of $60 per direct manufacturing labor - hour. A retail outlet has requested a bid on a special order of the Toy Mouse product. Estimates for this order include: Direct materials $40,000; 500 direct manufacturing labor - hours at $20 per hour; and a 20% markup rate on total manufacturing costs. The bid price for this special order is:

Answer 1

Answer:

Bid price =  N96,000

Explanation:

Mark up is  profit expressed as a percentage of cost. Bid price will be equal to the manufacturing cost plus the mark up profit.

Bid price is the total manufacturing cost + (20% of the manufacturing cost )

Manufacturing cost = D. materials cost + D. Labour cost + Manufacturing Overheads

Manufacturing cost= 40,000 + (500 × $20 ) + ( 500× $60)

                                = 80000

Bid price = 80,000 + (20% × 80,000)

              =  N96,000