Question

Calgary Manufacturing company makes chairs and desks. The following costs were incurred in making its products during its first year of operation.

Direct Materials
Chairs $4,000
Desks $6,000
Total $10,000

Direct Labor
Chairs $12,000
Desks $8,000
Total $20,000

Also, the company incurred $14,000 of employee benefits cost. Since these overhead costs are driven by the use of labor, they are allocated to the products based on the direct labor dollars. Based on this information alone, what is the total cost of making chairs?
1) $16,000
2) $30,000
3) $24,400
4) None of the answers is correct.

Answer 1

The total cost of making chairs is $16,000.

Step-by-step explanation:

To determine the total cost of making chairs, we need to consider the direct materials, direct labor, and allocated overhead costs. The direct materials cost for chairs is $4,000, while the direct labor cost is $12,000. Based on the given information, there is no specific mention of overhead costs allocated to chairs. Therefore, the total cost of making chairs can be calculated as $4,000 + $12,000 = $16,000.