Audrey Cleaners is a large cleaning business.They use operations costing to measure and track the costs incurred for specific product lines.While most of the products do require some machine time,managers have determined that total labour hours drive its manufacturing overhead costs.Traditionally,indirect labour hours are one fifth of total direct labour hours.During the month of June,the following data is provided for the time worked on a large job:
Direct labaur$\quad $ $\quad $3000 hours at $\$ 10$ per hour
If total overhead costs during the month was $16 000 when a total of 20 000 total labour hours were worked,what is the overhead allocated to the large job?
A) $3600
B) $3000
C) $2880
D) $2560

Question

Quizplus · Accepted Answer

To allocate overhead to the large job, we need to first calculate the total direct labour hours and then use the proportion of indirect labour hours to allocate overhead.

Total direct labour hours for the large job = regular labour hours + overtime labour hours 
= 600 + 200 = 800

Total indirect labour hours = 1/5 of total direct labour hours 
= 1/5 x 800 = 160

Overhead cost per labour hour = Total overhead cost / total labour hours 
= $16,000 / 20,000 = $0.8

Overhead allocated to the large job = overhead cost per labour hour x total indirect labour hours 
= $0.8 x 160 
= $128

Therefore, the overhead allocated to the large job is $128, which is closest to option C ($2,880).

Audrey Cleaners Is a Large Cleaning Business \quad \quad

Audrey Cleaners Is a Large Cleaning Business $\quad$ $\quad$