Retter Shoe Company has expected overhead costs of $12,000,000. The majority of

Question

Retter Shoe Company has expected overhead costs of $12,000,000. The majority of the overhead costs are incurred providing production support to the direct labor force. Direct labor rates vary from $10 to $20 per hour, and more complex tasks are assigned to more skilled workers who have higher pay rates. Retter projects direct labor costs of $4,800,000 and 300,000 direct labor hours. More complex tasks require proportionally more support than do the less complex tasks.
Each model/size of shoe is produced in a single production run and constitutes a job. During the year, the company produced 9,000 pairs of the model K25, size 8 dress shoe. A total of 11,000 direct labor hours, costing $165,000, were assigned to the job.




Determine the amount of overhead assigned to the model K25, size 8 dress shoe, using both direct labor hours and direct labor cost as the allocation base. (Round intermediate calculations to 2 decimal places, e.g. 12.50 and the final answer to 0 decimal places, e.g. 125.)

Direct labor hours $
Direct labor costs $

Explanation / Answer

Total overhead = 12,000,000 overhead per direct labor dollar = 12,000,000/4,800,000 = $2.50 per direct labor dollar overhead per direct labor hour = 12,000,000/300,00 = $40 per direct labor hour overhead assigned based on direct labor dollars = 165,000*$2.50 = $412,500 overhead assigned based on direct labor hours = 11,000*40 = $440,000 Answer: Direct labor hours $440,000 Direct labor costs $412,500

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