Tony's Skate Corporation manufactures two models of skate boards: a standard and a deluxe model. The following activity and cost information has been compiled.

-Assume a traditional costing system applies the $120,000 of overhead costs based on direct labor hours.What is the total amount of overhead costs assigned to the standard model?
A)$40,000
B)$75,000
C)$50,000
D)$70,500

Question

Tony's Skate Corporation manufactures two models of skate boards: a standard and a deluxe model. The following activity and cost information has been compiled.

-Assume a traditional costing system applies the $120,000 of overhead costs based on direct labor hours.What is the total amount of overhead costs assigned to the standard model?
A)$40,000 
B)$75,000 
C)$50,000 
D)$70,500

Quizplus · Accepted Answer

Using a traditional costing system, the overhead costs are assigned based on direct labor hours. The total direct labor hours for the standard model is 15,000 and for the deluxe model is 5,000. Therefore, the overhead cost assigned to the standard model would be:
($120,000 / (15,000 + 5,000)) x 15,000 = $90,000
Therefore, the correct answer is B) $75,000, which is closest to $90,000.

Tony's Skate Corporation Manufactures Two Models of Skate Boards: a Standard