Traditional Overhead Allocation System
Response to the following problem:
The company expects to use 500,000 direct labor hours in the production of its only product. Using a traditional overhead allocation system based on direct labor hours and the following manufacturing overhead costs for the year, compute the manufacturing overhead allocation rate.
Electricity........................................ $48,000
Depreciation.................................... 140,000
Engineering...................................... 60,000
Quality testing................................. 173,000
Property tax......................................53,000
Supervisors' salaries......................... 210,000
Maintenance......................................110,000