Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman’s

Question

Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman’s overhead costs consist of setting up machines, $2,400,000; machining, $5,400,000; and inspecting, $1,800,000. 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?

$3,840,000

$4,608,000

$5,010,000

$6,000,000

Explanation / Answer

Estimated overhead cost = 2400000+5400000+1800000 = 9600000

Estimated labour hour = 15000+25000 = 40000 labour hour

Overhead rate = 9600000/40000 = 240 per labour hour

Overhead applied Case 165 = 25000*240 = 6000000

so answer is d) $6,000,000

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