Question

Sheddon Industries produces two products. The products' identified costs are as follows: Product A Product B Direct materials $ 27,000 $ 22,000 Direct labor 19,000 31,000 The company's overhead costs of $61,000 are allocated based on labor cost. Assume 11,000 units of product A and 12,000 units of Product B are produced. What amount of production costs would be assigned to Product A

Answer 1

Total cost for Product A 69,180

Step-by-step explanation:

The overhead is allocated on labor cost:

`(Cost\: Of \:Manufacturing \:Overhead)/(Cost \:Driver)= Overhead \:Rate`

We will distribute the overhead cost over the cost driver (DL cost) to get the overhead rate

overhead: 61,000

total labor cost: 19,000 + 31,000 = 50,000

61,000/50,000 = $1.22

Now this rate means for every dollar of labor, 1.22 of overhead is applied.

Product A cost

DM 27,000

DL 19,000

MO 19,000 x 1.22 = 23,180

Total cost 69,180