Question

ABC Company produces two products, X and Y. Overhead is allocated on the basis of direct labor hours. How much overhead is allocated to X?XYCostFactory maintenance employees8 employees30 employees$ 96,000Rent on the factory building1,000 square feet2,000 square feet180,000Utility800 hours400 hours44,000Direct labor hours2 hours per unit3.3 hours per unitVolume700 units2,000 unitsA)$56,000 B)$264,000 C)$180,000 D)$78,000 E)Cannot be determined from the information given.

Answer 1

A) $56,000

Step-by-step explanation:

Provided information,

Total overheads

Factory maintenance = $96,000

Rent on factory building = $180,000

Utility = $44,000

Total overheads = $320,000

Total labor hours of each product

Product X = 700
`*` 2 = 1,400 hours

Product Y = 2,000
`*` 3.3 = 6,600 hours

Total hours = 8,000

Overheads allocated to product X based on labor hours =
`(320,000)/(8,000) *\: 1,400 = 56,000`

Therefore correct option is

A) $56,000