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I have to complete a 3-5 page paper in APA format for the attached scenario and questions.
Complete a 3-5 page paper using APA formatting for the scenario and questions listed below.
Your paper will automatically be submitted to Turnitin in the assignment dropbox. Originality reports will
be returned to the faculty and student. Multiple submissions are allowed. For full credit, make sure that
your Similarity Index does not exceed 25% for undergraduate work.
Fabricator Inc., a specialized equipment manufacturer, uses a job order costing system. The overhead is
allocated to jobs on the basis of direct labor hours. The overhead rate is now $ 3,000 per direct labor
hour. The design engineer thinks that this is illogical. The design engineer has stated the following: Our
accounting system doesn?t make any sense to me. It tells me that every labor hour carries an additional
burden of $3,000. This means that while direct labor makes up only 5% of our total product cost, it drives
all our costs. In addition, these rates give my design engineers incentives to ?design out? direct labor by
using machine technology. Yet, over the past years as we have had less and less direct labor, the
overhead rate keeps going up and up. I won?t be surprised if next year the rate is $4,000 per direct labor
hour. I?m also concerned because small errors in our estimates of the direct labor content can have a
large impact on our estimated costs. Just a 30-minute error in our estimate of assembly time is worth
$1,500. Small mistakes in our direct labor time estimates really swing our bids around. I think this puts us
at a disadvantage when we are going after business.
1. What is the engineer?s concern about the overhead rate going ?up and up??
2. What did the engineer mean about the large overhead rate being a disadvantage when placing bids
and seeking new business?
3. What do you think is a possible solution?
Paper#9210668 | Written in 27-Jul-2016Price : $17.85