Allocating costs among products
Deka Construction Company expects to build three new homes during a specific accounting period. The estimated direct materials and labor costs are as follows.
Expected Costs | Home 1 | Home 2 | Home 3 |
Direct labor | $60,000 | $ 90,000 | $170,000 |
Direct materials | 90,000 | 130,000 | 180,000 |
Assume Deka needs to allocate two major overhead costs ($40,000 of employee fringe benefits and $20,000 of indirect materials costs) among the three jobs.
Required
Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each home.
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