Harrington Company has two products: A and B. The annual production and sales of

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?

Explanation / Answer

The amount of overhead cost that will be allocated to each unit of Product B = predetermined overhead rate * direct labor-hours of product B

= $ 66 per direct labor hour * ( 0.7 direct labor hour per unit * 1,150 units)

= $ 53,130

Hence the correct answer is $ 53,130

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