Dragon Fire Hot Sauce makes two types of hot sauces-meek and mild.Budgeted information for the two flavors appears below: $\begin{array}{lrr}&\text { Meek }&\text { Mild }\
\text { Sales } & \$ 600,000 & \$ 400,000 \
\text { Direct materials } & \$ 100,000 & \$ 120,000 \
\text { Direct labor cost } & \$ 108,000 & \$ 180,000 \
\text { Labor hourly cost } & \$ 12,00 & \$ 12,00
\end{array}$ 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 cost incurred.How much overhead is assigned to Mild?

Question

Quizplus · Accepted Answer

The overhead is allocated based on labor cost. Total labor cost is $108,000 (Meek) + $180,000 (Mild) = $288,000. The proportion for Mild is $180,000 / $288,000. Multiply this by total overhead $345,600 to get $216,000.

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