Figure 11-4
The Overdale plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows: $\begin{array}{ll}
\text { Maintenance } & £ 120,000 \
\text { Inspection } & £ 200,000
\end{array}$ The plant currently applies overhead using direct labour hours and expected capacity of 80,000 direct labour hours. The following data has been assembled for use in developing a bid for a proposed job: $\begin{array}{ll}
\text { Direct materials } & £ 1,500 \
\text { Direct labour } & £ 5,000 \
\text { Machine hours } & 400 \
\text { Number of inspections } & 6 \
\text { Direct labour hours } & 750
\end{array}$ Total expected machine hours for all jobs during the year are 40,000, and the total expected number of inspections is 2,500.
-Refer to Figure 11-4. Using direct labour hours to assign overhead, the total cost of the potential job would be
A)£9,500.
B)£6,000.
C)£3,000.
D)£1,600.

Question

Quizplus · Accepted Answer

The total overhead is £320,000 (£120,000 for maintenance + £200,000 for inspection). The overhead rate using direct labour hours is calculated as £320,000 / 80,000 hours = £4 per direct labour hour. For the proposed job, with 750 direct labour hours, the overhead assigned would be 750 hours * £4/hour = £3,000. Adding this to the direct materials (£1,500) and direct labour (£5,000) gives a total cost of £9,500 (£1,500 + £5,000 + £3,000).

Figure 11-4 the Overdale Plant Has Two Categories of Overhead Maintenance £120,000 Inspection £200,000\begin{array}{ll}\text { Maintenance } & £ 120,000 \\\text { Inspection } & £ 200,000\end{array} Maintenance Inspection ​£120,000£200,000​

Figure 11-4
the Overdale Plant Has Two Categories of Overhead $\begin{array}{ll}\text { Maintenance } & £ 120,000 \\\text { Inspection } & £ 200,000\end{array}$