Question - You are contemplating awarding a contract to the Azusa Manufacturing company for the assembly of wiring harnesses. Included in the cost estimate was 3,000 hours of direct labor. The company uses a plant-wide overhead rate. Assume that the projected overhead costs for the coming period are $3,800,000, and the projected direct labor amounts to 215,000 hours.
1. What is the overhead rate per hour?
2. Using above rate, what is the dollar amount of the overhead applicable to the contract?