A firm produces and sells two products, Plus and Max. The following information is available relating to setup costs (a part of factory overhead): Using direct labor hours as the allocation base, the setup cost portion of overhead that is allocated to each unit of product for Plus and Max, respectively is:
A) $.80; $.80.
B) $3.20; $3.20.
C) $4.00; $4.00.
D) $160.00; $12,800.00.
E) $200.00; $16,000.00.

Question

A firm produces and sells two products, Plus and Max. The following information is available relating to setup costs (a part of factory overhead):   Using direct labor hours as the allocation base, the setup cost portion of overhead that is allocated to each unit of product for Plus and Max, respectively is:
A) $.80; $.80. 
B) $3.20; $3.20. 
C) $4.00; $4.00. 
D) $160.00; $12,800.00. 
E) $200.00; $16,000.00.

Quizplus · Accepted Answer

$64,800/(1,000 + 80,000DLH) = $0.80/DLH
Plus: 5 DLH × $0.80/DLH = $4.00 per unit
Max: 5 DLH × $0.80/DLH = $4.00 per unit

A Firm Produces and Sells Two Products, Plus and Max