Question

Windsor co. incurs $1,050,000 of overhead costs each year in its three main departments, machining ($600,000), inspections ($300,000) and packing ($150,000). the machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year. information about windsor's two products is as follows: product x product y machining hours 1,000 3,000 inspections 100 500 orders packed 350 650 direct labor hours 1,700 1,800 if traditional costing based on direct labor hours is used, how much overhead is assigned to product x this year?

Answer 1

My answer is 510,000.

Since traditional costing based on direct labor is used, the important figures are:
1) direct labor hours of product x which is 1,700.
2) the total direct labor hours: 1,700 + 1,800 = 3,500
3) the total overhead cost which is 1,050,000

Product x:
(1,700 / 3,500) * 1,050,000 = 510,000