Normal Costing System
1. If K and K budgets $340,000 in Overhead for the year and uses direct labor costs that are budgeted at $500,000 as the cost driver; then, how much overhead would they allocate to each of the following jobs, given they use a normal costing system?
Henderson | Fisher | |
Direct Materials | $800 | $2,380 |
Direct Labor | $3,000 | $12,600 |
Overhead |
Homework Answers
Solution.
Total Overhead Cost is $340000
Total Direct Labor Cost $500,000
Overhead cost is allocated on the basis of the Direct Labor cost
Overhead cost per Direct Labor cost is $340000/500000 = $0.68 per Direct Labor cost
Overhead cost allocated on the Henderson and Fisher Job
| Henderson | Fisher | ||
| Direct Materials | $800 | $2380 | |
| Direct Labor | $3000 | $12600 | |
| Overhead | 0.68* Direct Labor Cost | $2040 | $8568 |
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