Merry Co. has two major categories of manufacturing overhead: material handling and quality control. The costs...
Merry Co. has two major categories of manufacturing overhead: material handling and quality control. The costs expected for these categories for the coming year are as follows:
|
Material handling |
$120,000 |
|
Quality inspection |
200,000 |
The plant currently applies overhead based on direct labor hours. The estimated direct labor hours are 80,000 per year. The plant manager is asked to submit a bid and assembles the following data on a proposed job:
|
Direct materials |
$4,000 |
|
Direct labor (2,000 hours) |
6,000 |
What is the estimated product cost on the proposed job?
A) $8,000
B) $10,000
C) $18,000
D) $14,000
Homework Answers
| Direct material | $4,000 |
| Direct labor | 6000 |
| Overhead: | |
| Material handling (120000 / 80000 × 2000) | 3,000 |
| Quality inspection (200000 / 80000 × 2000) | 5,000 |
| Estimated product cost | $18,000 |
Option C is correct answer.
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