Gibson Construction Company expects to build three new homes during a specific a

Question

Gibson Construction Company expects to build three new homes during a specific accounting period. The estimated direct materials and labor costs are as follows: Expected Costs Home 1 Home 2 Home 3 Direct labor $ 80,000 $ 94,000 $ 187,000 Direct materials 92,000 139,000 195,000 Assume Gibson needs to allocate two major overhead costs ($54,150 of employee fringe benefits and $12,780 of indirect materials costs) among the three jobs. Required Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each house. (Round "Allocation rate" to 2 decimal places.)

Explanation / Answer

Solution:

139,000

Cost drivers House 1 House 2 House 3 Direct labour 80,000 94,000 187,000 Direct material 92,000

139,000

195,000 Employee fringe benefits Direct labour 12,000 14,100 28,050 Indirect material Direct Material 2,760 4,170 5,850 Total cost 186,760 251,270 415,900

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