How did using manufacturing cost only, instead of using all costs associated with the CompWest.com job, affect the amount of Farley’s bid for that job?

Farley, Inc. is a manufacturer that produces customized computer components for several well-known computer-assembly companies.  Farley’s latest contract with ComWest.com calls for Farley to delivery sound cards that simulate surround sound from two speakers.  Farley spent several hundred thousand dollars to design the sound card to meet CompWest.com’s specifications.

Farley’s president, Bryon Wilson, has stipulated a pricing policy that requires the bid price for a new job to be based on Farley’s estimated costs to design, manufacture, distribute, and provide customer service for the job, plus a profit margin.  Upon reviewing the contact figures, Farley’s controller, Paul York, was startled to find that the cots estimates developed by Farley’s cost account, Tony Hayes, for the CompWest.com bid were based on only the manufacture costs.  York is upset with Hayes.  He is not sure what to do next.  [source:  Horngren’s Accounting, Nobles/Mattison, Matsumura, 10^th ed, Pearson Hall.]

Participation:  To earn points for this Class Discussion Forum, you are to answer the question(s) provided (3 points, if properly formatted and using sources) and reply to at least two other student’s answers (1 point ea, 2 points maximum).  In your reply posts, please address the student by name, then give your comment.  Your replies to other students’ answers should provide helpful ideas for the class to learn about the topic.  Internet sources (using both in-text A.P.A. citing and a reference list at the end of your initial post) are required for this Class Discussion Forum.  Refer to the Syllabus for format.

Question 1:  How did using manufacturing cost only, instead of using all costs associated with the CompWest.com job, affect the amount of Farley’s bid for that job?

Question 2:  Identify the parties involved in Paul York’s dilemma.  What are his alternatives?  How would each party be affected by each alternative?  What should York do next?