K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities.The company uses direct labor hours as its overhead allocation base.If 80,000 direct labor hours are planned for this next year,how much overhead would be assigned to a product requiring 4 direct labor hours?
A)$46.25
B)$36.25
C)$185.00
D)$145.00
E)None of the choices

Question

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate by adding the indirect labor cost and the factory utilities cost:
$2,900,000 + $800,000 = $3,700,000
Then, we divide this amount by the planned direct labor hours:
$3,700,000 ÷ 80,000 = $46.25 per direct labor hour
Finally, we can calculate the overhead assigned to a product requiring 4 direct labor hours:
4 direct labor hours x $46.25 per direct labor hour = $185.00

K Company Estimates That Overhead Costs for the Next Year