Addison Company manufactures two products, Regular and Supreme.Addison's overhead costs consist of machining, $2,500,000; and assembling, $1,250,000.Information on the two products is: $$\begin{array} { l c c }
& \text { Regular } & \text { Supreme } \
\text { Direct labor hours } & 10,000 & 15,000 \
\text { Machine hours } & 10,000 & 30,000 \
\text { Number of parts } & 90,000 & 160,000
\end{array}$$
- Overhead applied to Regular using traditional costing using direct labor hours is

Question

Addison Company manufactures two products, Regular and Supreme.Addison's overhead costs consist of machining, $2,500,000; and assembling, $1,250,000.Information on the two products is: $$\begin{array} { l c c } 
& \text { Regular } & \text { Supreme } \
\text { Direct labor hours } & 10,000 & 15,000 \
\text { Machine hours } & 10,000 & 30,000 \
\text { Number of parts } & 90,000 & 160,000
\end{array}$$
- Overhead applied to Regular using traditional costing using direct labor hours is

Quizplus · Accepted Answer

Traditional costing allocates overhead based on direct labor hours. Total overhead is $3,750,000 ($2,500,000 + $1,250,000). Total direct labor hours are 25,000 (10,000 + 15,000). Overhead rate per direct labor hour is $150 ($3,750,000 / 25,000). Overhead applied to Regular is $1,500,000 (10,000 hours x $150).

Addison Company Manufactures Two Products, Regular and Supreme - Overhead Applied to Regular Using Traditional Costing Using Direct