Exercise 12-8 Allocating costs among products LO 12-3 Rundle Construction Compan

Question

Exercise 12-8 Allocating costs among products LO 12-3 Rundle Construction Company expects to build three new homes during a specific accounting peniod. The estimated direct materials and labor costs are as folows: BSrest nateriala 100, 000 13,000 13,000 Assume Rundie needs to allocate two major overhead costs (s35,900 of employee fringe benefits and $34,480 of indirect materias costs) among the three jobs Required Choose an appropriate cost drher for each of the overhead costs and determine the total cost of each house. (Round "Allocation Prine ete" to 2 decimel places.) Relerences Drect ma Prey 1 of 3

Explanation / Answer

Calculate following :

Fringe benefits Home Allocation base * Weight of base = Allocated cost 1 35900 * 13.57% = 4872 2 35900 * 31.56% = 11330 3 35900 * 54.87% = 19698 Total 35900 Indirect material Allocation base * Weight = Allocated cost 1 34480 * 23.20% = 7999 2 34480 * 32.02% = 11041 3 34480 * 44.78% = 15440 Total 34480 The cost assigned to determine cost of each house Expected cost House 1 House 2 House 3 Total Direct labour 46000 107000 186000 339000 Direct material 100000 138000 193000 431000 Fringe benefits 4872 11330 19698 35900 Indirect material 7999 11041 15440 34480 Total 158871 267371 414138 840380

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