Question

Johnstone Company manufactures two products, Board 12 and Case 165. Johnstone's overhead costs consist of setting up machines, $1,600,000; machining, $3,600,000; and inspecting, $1,200,000. Information on the two products is:

Board 12 Case 165
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Case 165 using traditional costing using direct labor hours is

a. $2,560,000.
b. $3,072,000.
c. $3,340,000.
d. $4,000,000.

Answer 1

d. $4,000,000.

Step-by-step explanation:

Total Overhead Costs = Setting up Machines + Machining + Inspecting

Total Overhead Costs = $ 1600,000 + $ 3600,000 + $1,200,000

Total Overhead Costs = $ 64,00,000

Direct labor hours of Case 165 = 25,000

Total Direct labor Hours = 15,000 + 25,000= 40,000

Traditional Costing Overhead for Case 165= Total Overhead Costs/ Total Direct Labor Hours )* LAbor Hours for Case 165

Traditional Costing Overhead for Case 165= ($ 64,00,000/40,000) 25000

Traditional Costing Overhead for Case 165= 160 * 25,000

Traditional Costing Overhead for Case 165=$ 4000,000