Question

Harrington Company has two products: A and B. The annual production and sales of Product A is 1,750 units and of Product B is 1,150 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.7 direct labor-hours per unit. The predetermined overhead rate is $66.00 per direct labor-hour. What it the amount of overhead cost that will be allocated to each unit of Product B? (Round your answer to 2 decimal places.)

Answer 1

Answer:

The overhead cost assigned to each unit of product B is $46.2 per unit.

Explanation:

Overhead absorbed in each product B can be calculated as under:

Overhead Absorbed = Overhead Absorption Rate * Absorption Basis

Here in this question, the absorption basis is Direct labor hours. So the direct labor hour per unit of Product B is 0.7 Hr and the OAR is $66.

By putting values in the above equation, we have:

Overhead Absorbed = $66 per unit * 0.7Hrs = $46.2 per unit