UR Company has two products, U and R. Overhead costs are presently allocated to

Question

UR Company has two products, U and R. Overhead costs are presently allocated to the two
products based on the labor-hours used to produce each product. It takes one labor-hour to make one
unit of each product. If total overhead is $260,000, what is the total overhead allocated to Product U using the current method of allocating overhead based on labor-hours (80,000 labor-hours for U and 50,000 labor-hours for R)?

a) Calculate the Predetermined Overhead Rate

b) Calculate the amount of overhead applied to Product U

Explanation / Answer

a)predetermined overhead rate= total overhead costs/cost driver

=260000/(80000+50000)=2

b)for product U it is =2*80000=160000

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