Question

Comfort Corporation manufactures two models of office​ chairs, a standard and a deluxe model. The following activity and cost information has been​ compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Standard 14 8 265 Deluxe 27 15 200 Overhead costs $ 73 comma 800 $ 82 comma 800 Assume a traditional costing system applies the overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the standard​ model? (Do not round interim calculations. Round the final answer to the nearest whole​ dollar.)

Answer 1

Overhead assigned to standard mode = $89,245.16

Step-by-step explanation:

Under the traditional absorption costing system, overhead is assigned to units produced using the direct labour hours basis.

Overhead absorption rate = Budgeted overhead for the period/Budgeted labour hours

OAR = $(73,800 + 82,800) /(265 + 200) hours

= $156,600 /465

= $336.77 per hour

Overhead assigned to standard model= OAR × labour hours used

= $336.77 × 265

=$89,245.16