Dragon Fire Hot Sauce makes two types of hot sauces-meek and mild. Budgeted information for the two flavors appears below: $$\begin{array} { l r r } & \text { Meek } & \text { Mild } \
\text { Sales } & \$ 600,000 & \$ 400,000 \
\text { Direct materials } & \$ 100,000 & \$ 120,000 \
\text { Direct labor cost } & \$ 108,000 & \$ 180,000 \
\text { Labor hourly cost } & \$ 12.00 & \$ 12.00
\end{array}$$ The company estimates it will incur $345,600 in overhead costs for the period. Dragon Fire allocates overhead cost to products based on the labor hours worked on each product. How much is the total overhead applied to Meek?

Question

Quizplus · Accepted Answer

To find the overhead applied to Meek, first calculate the labor hours for Meek: $108,000 / $12 = 9,000$ hours. Then, find the total labor hours for both products: $9,000 + (180,000 / 12) = 24,000$ hours. The overhead rate is $345,600 / 24,000 = $14.40$ per hour. Therefore, the overhead applied to Meek is $9,000 	imes 14.40 = $129,600.

Dragon Fire Hot Sauce Makes Two Types of Hot Sauces-Meek