Question

Dartmouth Corporation manufactures two models of office​ chairs, a standard and a deluxe model. The following activity and cost information has been​ compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Standard 13 7 255 Deluxe 33 14 235 Overhead costs $ 64 comma 400 $ 71 comma 400 Assume a traditional costing system applies the overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the deluxe​ model

Answer 1

The total amount of overhead costs assigned to the deluxe​ model is $64,745 .

Step-by-step explanation:

Traditional Costing System :

According to Traditional costing system, the overhead cost or indirect cost is allocated on the basis of total direct labors hours, total number of units, etc.

Overhead cost : The cost which is not related to the day to day expenses. Like - depreciation,. insurance, etc.

Steps to compute the total amount of overhead costs assigned to the deluxe​ model:

Step 1 : First we have to calculate the total overhead cost.

Step 2 : Now, allocation the total overhead cost to the total direct labors

Step 3 : After applying the above two steps, the answer is come.

Calculation is shown below:

Step 1 : Total overhead cost = Standard + Deluxe

= $64,000 + $71,000

= $135,000

Step 2: The total direct labors = Standard + Deluxe

= 255 + 235

= 490

After calculating above steps, the allocation for Deluxe is displayed below

= Total Overhead cost × Deluxe direct labors ÷ Total direct labors

= $135,000 × ( 235 ÷ 490 )

= $64,745

Thus, the total amount of overhead costs assigned to the deluxe​ model is $64,745 .