The Engineers Concern about the Overhead Rate Going Up and Up in Assignment

The Engineers Concern about the Overhead Rate Going Up and Up in Managerial Accounting - Assignment Example A single hour of the labor carries an additional burden amount of $1,500 (Wagener, 2010). Moreover, the underlying labor cost contributes up to five percent of the prevailing cost of the product thus making it the main propeller of the all the cost of Fabricator Inc. Since one cost is utilized as the main pricing standard and in the case of the Fabricator Inc they use labor, their main concern that the underlying set standard might be cumbersome to accomplish (Warren, Reeve, Duchac, & Warren, 2012). Therefore, lost labor in its entity is inadequacies as an example is depicted by the prevailing management as either poor pricing or production (Warren, Reeve, Duchac, & Warren, 2012). Even though overhead is fundamental and normally demanded the production process, bid pricing that is mainly driven by labor as the standard would eventually be more expensive. The most effective means would be utilizing activity-based costing because Fabricator Inc mainly specializes in executing underlying customer orders and every order is unique and possesses different requirement. Utilizing single overhead rate is thus not acceptable (Wagener, 2010). The engineer has also mentioned that the standard was being worked around by the corresponding design engineering thus rendering the prevailing standard utilized by Fabricator Inc unreliable (Kaplan & Anderson, 2007). The engineer meant that high job cost standard for the project biding might infrequent the prevailing project managers mandated by pricing a job forbid when he said that a relatively large overhead rate is a disadvantage to the company in terms of placing bids and seeking new business (Lal & Srivastava, 2009). Any errors in the estimate for the labor hours would definitely possess massive implications in the operation of the company (Warren, Reeve, Duchac, & Warren, 2012). Moreover, miscalculation or rather a failure by few hours  could definitely imply that the company would either be losing the bid or correspondingly be losing money in case the job is acquired.