Question

Boswell Company manufactures two products, Regular and Supreme. Boswell’s overhead costs consist of machining, $3,000,000; and assembling, $1,500,000. Information on the two products is: Regular SupremeDirect labor hours 10,000 15,000Machine hours 10,000 30,000Number of parts 90,000 160,000Overhead applied to Supreme using traditional costing using direct labor hours is: a. $2,700,000.b. $3,210,000.c. $1,290,000.d. $1,800,000.

Answer 1

Answer:

a. $2,700,000

Explanation:

Using traditional costing the overhead are applied as,

Total overhead costs = 3000,000+1500,000 = $4,500,000

Total labor hours (base) = 10,000+ 15,000 = 25,000 hours

Per hour rate = 4,500,000 / 25,000 = 180/ hour

Total applied to Supreme = 180 * 15,000 = $2,700,000

All the overheads are applies evenly using total hours as base, avoiding the activity basis.

Hope that helps.