Steering Company has expected overhead costs of $14,400,000. The majority of the overhead costs are incurred...
Steering Company has expected overhead costs of $14,400,000. The
majority of the overhead costs are incurred providing production
support to the direct labor force. Direct labor rates vary from $10
to $20 per hour, and more complex tasks are assigned to more
skilled workers who have higher pay rates. Steering projects direct
labor costs of $2,880,000 and 360,000 direct labor hours. More
complex tasks require proportionally more support than do the less
complex tasks.
Each model/size of shoe is produced in a single production run and
constitutes a job. During the year, the company produced 8,400
pairs of the model K25, size 8 dress shoe. A total of 10,400 direct
labor hours, costing $72,800, were assigned to the job.
(a)
Determine the amount of overhead assigned to the model K25, size 8
dress shoe, using both direct labor hours and direct labor cost as
the allocation base
Homework Answers
a) Overhead rate = Estimated overhead/Estimated allocation Base
On the basis of Direct labor hour =14400000/360000 = $40 per labor hour
On the basis of direct labor cost = 14400000/2880000 = 500% of direct labor cost
Overhead assigned :
On the basis of labor hours = 10400*40 = $416000
On the basis of direct labor cost = 72800*5 = $364000
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