Top plating LTD uses electroplating processes to coat products in silver or gold.to individual customers specs.most of the company's work is obtained through the tender process, where the company responds to an invitation to submit a competitive bid.over the last few months Top Plating has been very quiet and the manager is concerned that the business will fail if it does not improve its success rate with tenders.the company has two production departments ,preparation and coating,and the production requirements for individual jobs can differ significantly.some job require extensive preparation ,with minimal coating others require little preparation but multiple coats.
the following table describes the result of the five bids that the company submitted last month.(the num. in brackets after losses indicate where the company was ranked in the bid process):
| jon. no |
direct labour hours in praparation |
direct labours hours in caoting |
estimated direct labour hours |
overhead cost of bid |
won/loss |
| 1 |
12000 |
3000 |
15000 |
41250$ |
lost(5th) |
| 2 |
3000 |
12000 |
15000 |
41250 |
won |
| 3 |
15000 |
0 |
15000 |
14250 |
lost(3rd) |
| 4 |
0 |
15000 |
15000 |
41250 |
won |
| 5 |
7500 |
7500 |
15000 |
41250 |
lost(2nd) |
the pattern of resource usage implied in the above table has persisted for several months.the company uses a predetermined plantwide overhead rate based on practical capacity which is measured in direct labour hours.the budgeted overhead for the year for the preparation department is 540000(180000 $ fixed and 360000 $ variable) and for the coating department it is 1440000$(360000 fixed and 1080000 $ variable) each dep has a monthly practical capacity of 30000 direct labour hours.
REQUIRED:
1.Write a report to the manager identifying a possible cause of this situation develop an alternative bidding scheme to overcome this problem,support your analysis with a comparison of the suggested and existing scheme.
2.When calculating the applied overhead using the departmental overhead method instead of the plantwide method can we use the same cost driver with both the preparation department and the casting department?
3.What is overhead cost of bid (the number in the table)?