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25 April, 01:45

Dartmouth Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Standard 13 7 255 Deluxe 33 14 235 Overhead costs $ 64 comma 400 $ 71 comma 400 Assume a traditional costing system applies the overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the deluxe model

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  1. 25 April, 04:51
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    The total amount of overhead costs assigned to the deluxe model is $64,745.

    Explanation:

    Traditional Costing System:

    According to Traditional costing system, the overhead cost or indirect cost is allocated on the basis of total direct labors hours, total number of units, etc.

    Overhead cost : The cost which is not related to the day to day expenses. Like - depreciation,. insurance, etc.

    Steps to compute the total amount of overhead costs assigned to the deluxe model:

    Step 1 : First we have to calculate the total overhead cost.

    Step 2 : Now, allocation the total overhead cost to the total direct labors

    Step 3 : After applying the above two steps, the answer is come.

    Calculation is shown below:

    Step 1 : Total overhead cost = Standard + Deluxe

    = $64,000 + $71,000

    = $135,000

    Step 2: The total direct labors = Standard + Deluxe

    = 255 + 235

    = 490

    After calculating above steps, the allocation for Deluxe is displayed below

    = Total Overhead cost * Deluxe direct labors : Total direct labors

    = $135,000 * (235 : 490)

    = $64,745

    Thus, the total amount of overhead costs assigned to the deluxe model is $64,745.
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