Zimmerman Company manufactures two products, Board 12 and Case 165.Zimmerman's overhead costs consist of setting up machines, $2,400,000; machining, $5,400,000; and inspecting, $1,800,000.Information on the two products is: $$\begin{array} { l r r }
& \text { Board 12 } & \text { Case 165 } \
\text { Direct labor hours } & 15,000 & 25,000 \
\text { Machine setups } & 600 & 400 \
\text { Machine hours } & 24,000 & 26,000 \
\text { Inspections } & 800 & 700
\end{array}$$ Overhead applied to Board 12 using traditional costing using direct labor hours is

Question

Zimmerman Company manufactures two products, Board 12 and Case 165.Zimmerman's overhead costs consist of setting up machines, $2,400,000; machining, $5,400,000; and inspecting, $1,800,000.Information on the two products is: $$\begin{array} { l r r } 
& \text { Board 12 } & \text { Case 165 } \
\text { Direct labor hours } & 15,000 & 25,000 \
\text { Machine setups } & 600 & 400 \
\text { Machine hours } & 24,000 & 26,000 \
\text { Inspections } & 800 & 700
\end{array}$$ Overhead applied to Board 12 using traditional costing using direct labor hours is

Quizplus · Accepted Answer

Traditional costing allocates overhead based on direct labor hours. Total overhead is $9,600,000. Board 12 uses 15,000 out of 40,000 total direct labor hours, so the overhead applied to Board 12 is (15,000/40,000) * $9,600,000 = $3,600,000.

Zimmerman Company Manufactures Two Products, Board 12 and Case 165