This is a paper that is addressing the predermined rate at Gibson Fabricators company. The paper contains set of questions to answer and also a video presentation assignment.
Addressing the predermined rate at Gibson Fabricators company
Write a report addressing the following questions to the president of Gibson
Fabricators, Kevin Robinson.
1. Firstly, recalculate the predetermined rate assuming that the new machine will be installed. Explain why the new predetermined overhead rate is higher (or lower) than the rate that was originally estimated for the year 2020.
2. Secondly, the company has received a job order from Fairfield corporation. The estimated direct material costs for delivering the order is $45,800. The new machine will be for this job. The expected labour cost will be $8,400 for 400 hours of direct labour.
3. Thirdly, analyse the effect of the new rate on the cost of jobs that do not use the new automated milling machine.
ACCT6004_Assessment Brief 2_Individual Case Study
4. Fourthly, explain whether the managers should be concerned about the new overhead rate.
5. Lastly, after seeing the new predetermined overhead rate, the production manager admitted that he probably wouldn’t be able to eliminate all of the 6,000 direct labour-hours. He had been hoping to accomplish the reduction by not replacing workers who retire or quit, but that would not be possible. As a result, the real labour savings would be only about 2,000 hours—one worker. In the light of this additional information, evaluate the original decision to acquire the automated milling
machine from Central Robotics.
Part B – Video Presentation
Record a five-minute video presentation explaining the steps you have followed to conduct the analyses and rationale behind the selected accounting tools and processes. Summarise your major findings.
The video has to show your face, so we can identify you as the student completing the assessment. Please show visibly your student card at the beginning of the video for identification purposes. Video recordings from your phone will be sufficient for this purpose.
Gibson Fabricators Corporation
Gibson Fabricators Corporation manufactures a variety of parts for the automotive industry. The company uses a job-order costing system with a plantwide predetermined overhead rate based on direct labour-hours. On the December 10, 2019, the company’s controller made a preliminary estimate of the predetermined overhead rate for 2020. The new rate was based on the estimated total manufacturing overhead cost of $2,475,000 and the estimated 52,000 total direct labour-hours for 2020: