A firm produces and sells two products,Plus and Max.The following information is available relating to setup costs (a part of factory overhead):
-Using direct labor hours as the allocation base,the setup cost portion of overhead that is allocated to each unit of product for Plus and Max,respectively is:
A)$.80; $.80.
B)$3.20; $3.20.
C)$4.00; $4.00.
D)$160.00; $12,800.00.
E)$200.00; $16,000.00.

Question

A firm produces and sells two products,Plus and Max.The following information is available relating to setup costs (a part of factory overhead): 
-Using direct labor hours as the allocation base,the setup cost portion of overhead that is allocated to each unit of product for Plus and Max,respectively is:
A)$.80; $.80. 
B)$3.20; $3.20. 
C)$4.00; $4.00. 
D)$160.00; $12,800.00. 
E)$200.00; $16,000.00.

Quizplus · Accepted Answer

The setup cost portion of overhead allocated to each unit is calculated by dividing the total setup costs by the total direct labor hours, then multiplying by the direct labor hours per unit. The problem implies that the allocation is the same for both Plus and Max, leading to the same cost per unit.

A Firm Produces and Sells Two Products,Plus and Max