Johnstone Company manufactures two products, Board 12 and Case 165. Johnstone’s
ID: 2553625 • Letter: J
Question
Johnstone Company manufactures two products, Board 12 and Case 165. Johnstone’s overhead costs consist of setting up machines $1,600,000; machining $3,600.00; and inspecting; $1,200,000. Information on the two products is Board 12. Case 165 Direct Labor Hours. 15,000. 25,000 Machine setups. 600. 400 Machine hours. 24,000. 26,000 Inspections 800. 700Overhead applied to Case 165 using traditional costing using direct labor hours is Johnstone Company manufactures two products, Board 12 and Case 165. Johnstone’s overhead costs consist of setting up machines $1,600,000; machining $3,600.00; and inspecting; $1,200,000. Information on the two products is Board 12. Case 165 Direct Labor Hours. 15,000. 25,000 Machine setups. 600. 400 Machine hours. 24,000. 26,000 Inspections 800. 700
Overhead applied to Case 165 using traditional costing using direct labor hours is
Explanation / Answer
Total Overhead = Costs of Setting up Machines + Costs of Machining + Costs of Inspecting
= $ 1,600,000 + $ 3,600 + $ 1,200,000
= $ 2,803,600
Total Direct Labor Hours = 15,000 + 25,000
= 40,000
The Overhead Rate as per the raditional costing using direct labor hours = Total Overhead/Total Direct Labor Hours
= $ 2,803,600 /40,000 direct labor hours
= $ 70.09
Hence the Overhead applied to Case 165 using traditional costing using direct labor hours = The Overhead Rate as per the raditional costing using direct labor hours * direct labor hours of Case 165
= $ 70.09 * 25,000
= $ 1,752,250
Hence the correct answer is $ 1,752,250
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