Tidwell Industries has the following overhead costs and cost drivers. Direct lab

Question

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100000 for the year. Cost Driver Activity 500 ordens 450 setups 125000 MH Est. Overhead - Activity CostPool --CostDriver- Ordering and Receiving Orders s 165000 337500 Machine Setup Machining Assembly Inspection Setups Machine hours Parts Inspections 1625000 1290000 1000000 parts 345000500 inspections If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is O $13. O $16. O s11. O $38.

Explanation / Answer

D. $38

If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is:

= ($165,000 + $337,500 + $1,625,000 + $1,290,000 + $345,000) / 100,000

= $38

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