Bridgeton Industries

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We first calculated the predetermined overhead rate using the direct labor cost for both 1988 and 1990. Upon calculating these costs we were able to apply this percentage to the direct labor for each product to factor in the manufacturing overhead. After factoring in the updated labor price (with the manufacturing overhead cost) we added in the direct materials to get the total costs. After subtracting the sales price from the total costs we obtained the profit and used the profit divided by the total costs to obtain our percentage of gross margin for each product, based upon 1988 and 1990 data.

4. The product costs reported by the cost system are appropriate for use in the strategic analysis. The company’s cost system provided information about the cost of the goods and services sold by the company and the processes used to produce these goods and services. This information was thorough enough where we were able to obtain the results we needed when analyzing the data.

5. In preparing the estimated model year budget for the ACF in 1991, in scenario one we took the % increase from 1989 to 1990 and applied that % increase towards 1991. We assumed the increase would remain constant as all other factors remained the same. In the second scenario where the Manifolds were removed we increased the amounts for Fuel Tanks and Doors to account for the removal. We also decreased the Overhead amounts, based on the assumption that there would be less employees from removing a job function for ACF. Below are the details of the scenarios:

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