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: $$\begin{array} { l c c }
& \text { Regular } & \text { Supreme } \
\text { Direct labor hours }& 10,000 & 15,000 \
\text { Machine hours } & 10,000 & 30,000 \
\text { Number of parts } & 90,000 & 160,000
\end{array}$$ Overhead applied to Regular using traditional costing using direct labor hours is
A) $1,290,000.
B) $1,800,000.
C) $2,700,000.
D) $3,210,000.

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: $$\begin{array} { l c c } 
 & \text { Regular } & \text { Supreme } \
\text { Direct labor hours }& 10,000 & 15,000 \
\text { Machine hours } & 10,000 & 30,000 \
\text { Number of parts } & 90,000 & 160,000
\end{array}$$ Overhead applied to Regular using traditional costing using direct labor hours is
A) $1,290,000.
B) $1,800,000.
C) $2,700,000.
D) $3,210,000.

Quizplus · Accepted Answer

Traditional costing allocates overhead based on a single cost driver, in this case, direct labor hours. The total direct labor hours are 10,000 for Regular + 15,000 for Supreme = 25,000 hours. The total overhead is $3,000,000 (machining) + $1,500,000 (assembling) = $4,500,000. The overhead rate per direct labor hour is $4,500,000 / 25,000 hours = $180 per hour. For Regular, with 10,000 direct labor hours, the overhead applied is 10,000 hours * $180/hour = $1,800,000.

Boswell Company Manufactures Two Products, Regular and Supreme Overhead Applied to Regular Using Traditional Costing Using Direct Labor