Purchase Solution

Overhead cost allocation

Not what you're looking for?

Ask Custom Question

Please help with this problem.

Assume a builder is constructing three houses simultaneously. The direct materials and direct labor costs for each house are shown below:

House 1
House 2
House 3

Direct Materials
$ 140,000
$ 70,000
$ 90,000

Direct Labor
210,000
130,000
60,000

Overhead

Indirect costs such as supervisory salaries and indirect materials are $84,000.
A) Assume the builder allocates overhead (indirect) costs equally among the three houses. Determine the amount of overhead cost allocated to each house. Comment on whether this allocation scheme is reasonable. Explain why it may be inappropriate to use number of units as the allocation base.

Purchase this Solution

Solution Summary

The solution explains how overhead costs can be allocated in the given accounting problem.

Solution Preview

Thank you for using BrainMass.com.

The total overhead cost is $84,000

A) The overhead cost is allocated equally. The amount of overhead allocated to each house is 84,000/3 = $28,000
This allocation is not reasonable. The overhead cost ...

Purchase this Solution


Free BrainMass Quizzes
Motivation

This tests some key elements of major motivation theories.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.