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 W8 would be closest to:
A)$349.20 per unit
B)$873.90 per unit
C)$970.92 per unit
D)$332.55 per unit

Question

Quizplus · Accepted Answer

The traditional costing method allocates all of the overhead based on direct labor-hours. The total overhead cost allocated to Product W8 is $3,677,568 (computed as: 21,218 DLH x $174 per DLH).

To find the overhead assigned to each unit of Product W8, we need to divide the total overhead cost by the number of units produced. The number of units produced is given as 3,780.

Hence, the overhead assigned to each unit of Product W8 is $970.92 per unit (computed as: $3,677,568 / 3,780 units) which is closest to option C). Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $1,283,805 ÷ 11,900 DLHs = $107.88 per DLH (rounded)
Product W8: 9.0 DLHs × $107.88 per DLH = $970.92

If the Company Allocates All of Its Overhead Based on Direct