Doggle, Inc. has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows:Maintenance$400,000Inspecti on200,000The following data have been assembled for use in developing a bid for a proposed job:Direct materials$3,000Direct labor$8,000Machine-hours200Number of inspections2Direct labor-hours400The practical capacity of machine-hours for all jobs during the year is 12,500, and for inspections is 400. These are the cost drivers for maintenance and inspection costs, respectively. Using the appropriate cost drivers, the total cost of the potential job is:Select one:A. $11,000B. $18,400C. $36,800D. $16,300

The correct answer is B

Explanation:

Giving the following information:

Estimated overhead costs:

Maintenance= $400,000

Inspection= $200,000

Estimated activity allocation base:

Machine-hours= 12,500

Inspections= 400.

For a particular Job:

Direct materials= $3,000

Direct labor= $8,000

Machine-hours= 200

Number of inspections= 2

To calculate the total cost for a particular Job, first, we need to calculate the estimated overhead rate and then allocated to the Job.

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Maintenance:

Estimated manufacturing overhead rate= 400,000/12,500= $32 per machine -hour

Inspections:

Estimated manufacturing overhead rate= 200,000/400= $500 per inspection

Total Cost= direct material + direct labor + allocated overhead

Total cost= 3,000 + 8,000 + (32*200 + 500*2)= $18,400

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