Problem
Auburn, Inc.‘s overhead costs of $700,000 consist of machining $400,000; inspecting $200,000; and packaging $100,000. Machining works 4,000 hours a year, 500 inspections occur each year, and 1,000 packing orders occur each year. Information on the company's two products are as follows:
|
Alpha
|
Omega
|
|
Machining hours
|
1,000
|
3,000
|
|
Inspections
|
100
|
400
|
|
Packing orders
|
350
|
650
|
|
Direct labor hours
|
1,700
|
1,800
|
Determine how much overhead is allocated to Alpha assuming the use of a single overhead rate (based on direct labor hours) and assuming the use of ABC, respectively.