Veronica Company allocates overhead costs to jobs on the basis of direct labor hours. Its estimated average monthly factory costs for 2005 were as follows:
Average Monthly Costs
Direct material cost $60,000
Direct labor cost 300,000
Overhead cost 180,000
Its estimated average monthly direct labor hours are 20,000. Among the jobs worked on in November 2005 were two jobs, G and H, for which the following information was collected:
Job G Job H
Direct material cost $10,000 $10,000
Direct labor cost 28,000 32,000
Direct labor hours 2,400 2,800
a. Compute the overhead rate for Veronica Company.
b. Compute the total production costs of jobs G and H.
c. At what amounts would customers be billed if the company's practice was to charge 180 percent of the production of each job?
The problem deals with determining the amount of overheads apportioned to a product and the total cost of the products.