Question

Amberjack Company is trying to decide on an allocation base to use to assign manufacturing overhead to jobs. The company has always used direct labor hours to assign manufacturing overhead to products, but it is trying to decide whether it should use a different allocation base such as direct labor dollars or machine hours. Actual and estimated data for manufacturing overhead, direct labor cost, direct labor hours, and machine hours for the most recent fiscal year are summarized here Estimated Value Actual Value Manufacturing overhead cost Direct labor cost Direct labor hours Machine hours $594,000 $396,000 16,500 hours 7,500 hours $655,000 $450,000 18,000 hours 8,500 hours

Answer 1