Company Zee produces a widget that requires $15 of material per unit along with ½ hour of labor, the average rate being $18/hour. The company's predetermined overhead rate includes $5 of variable cost and $6 of fixed cost per labor hour when the activity level is 10,000 labor hours. Direct costing would cost this widget at $29.50 per unit.

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The Answer of Company Zee produces a widget that requires $15 of material per unit along with ½ hour of labor, the average rate being $18/hour. The company's predetermined overhead rate includes $5 of variable cost and $6 of fixed cost per labor hour when the activity level is 10,000 labor hours. Direct costing would cost this widget at $29.50 per unit.

Company Zee Produces a Widget That Requires $15 of Material