Question

Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours?

Answer 1

$280

Step-by-step explanation:

The computation of the overhead assigned is shown below:

But for that, first we have to compute the predetermined overhead rate which is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated direct labor-hours)

= ($35,000) ÷ (5,000 direct labor hours)

= $7 per direct labor hour

Now the overhead assigned is

= 40 direct labor hours × $7 per direct labor hour

= $280