If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product U4 would be closest to:
A)$189.21 per unit
B)$50.46 per unit
C)$32.49 per unit
D)$185.73 per unit

Question

Quizplus · Accepted Answer

To calculate overhead based on direct labor hours, we need to know the total amount of overhead expenses and total direct labor hours.

Total overhead expenses = $1,033,995

Total direct labor hours for Product U4 = 5,465

Overhead allocated per unit of Product U4 = Total overhead expenses / Total direct labor hours for Product U4 = $1,033,995 / 5,465 = $189.21 per unit.

Therefore, the overhead assigned to each unit of Product U4 would be closest to $189.21 per unit. Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $227,048 ÷ 3,600 DLHs = $63.07 per DLH (rounded)
Product U4: 3.0 DLHs × $63.07 per DLH = $189.21

If the Company Allocates All of Its Overhead Based on Direct