Comfort 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 14 8 265 Deluxe 27 15 200 Overhead costs $ 73 comma 800 $ 82 comma 800 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 standard model? (Do not round interim calculations. Round the final answer to the nearest whole dollar.)

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Business

Fletcher Benson

29 June, 09:34

Comfort 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 14 8 265 Deluxe 27 15 200 Overhead costs $ 73 comma 800 $ 82 comma 800 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 standard model? (Do not round interim calculations. Round the final answer to the nearest whole dollar.)

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Anton Blackwell · Answer 1

Overhead assigned to standard mode = $89,245.16

Explanation:

Under the traditional absorption costing system, overhead is assigned to units produced using the direct labour hours basis.

Overhead absorption rate = Budgeted overhead for the period/Budgeted labour hours

OAR = $ (73,800 + 82,800) / (265 + 200) hours

= $156,600 / 465

= $336.77 per hour

Overhead assigned to standard model = OAR * labour hours used

= $336.77 * 265

=$89,245.16