Kelita's Kar Company projects the following costs: Direct material $300,000
Direct labour 500,000
Indirect labour wages 50,000
Sales commissions 30,000
Production foremen salaries 75,000
Production equipment leases 125,000
Production amortization 60,000
Property taxes-plant 25,000
If overhead is allocated on the basis of direct labour hours and 25,000 direct labour hours are budgeted for next year, the estimated overhead allocation rate will be

Question

Quizplus · Accepted Answer

Overhead costs = Indirect labour wages + Sales commissions + Production foremen salaries + Production equipment leases + Production amortization + Property taxes-plant = 50,000 + 30,000 + 75,000 + 125,000 + 60,000 + 25,000 = 365,000Overhead allocation rate = Overhead costs / Direct labour hours = 365,000 / 25,000 = $14.60 per direct labour hour

Kelita's Kar Company Projects the Following Costs: Direct Material $300,000