North Outdoors Company makes two types of camping tents. Making a standard camping tent requires 4 hours of labor while making a deluxe camping tent requires 10 hours of labor. During the most recent accounting period, the company made 2,000 standard camping tents and 500 deluxe camping tents. Indirect manufacturing costs amounted to $52,000 and are allocated based on labor hours. How much overhead is allocated to the standard tents in the most recent accounting period?
Allocating Overhead Cost:
Overhead costs cannot be traced physically to units manufactured, and it is therefore allocated to the product and product units using one or more overhead allocation bases. The basis used must be relevant to the manner in which manufacturing overhead is incurred.
Answer and Explanation: 1
We must calculate the total direct labor hours for the current month, and calculate the overhead allocation rate using that and the overhead cost...
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fromChapter 4 / Lesson 2
Overhead costs are those that exist outside the labor and materials in production. Explore how these costs are driven by different factors, the importance of identifying them for efficiency and safety, as well as their variance between industries.