Ascend Company makes three models of jump drives in its factory: J512, J1G, and J4G. The expected…
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Ascend Company makes three models of jump drives in its factory: J512, J1G, and J4G. The expected overhead costs for the next fiscal year are as follows:
Payroll for factory managers ………………………. $150,000
Factory maintenance costs …………………………. 60,000
Factory insurance …………………………………… 30,000
Total overhead costs ……………………………… $240,000
Ascend uses labor hours as the cost driver to allocate overhead cost. Budgeted labor hours for the products are as follows:
J512 ……………………… 2,000 hours
J1G ……………………. 1,200
J4G …………………… 800
Total labor hours ……….. 4,000
Required
a. Allocate the budgeted overhead costs to the products.
b. Provide a possible explanation as to why Ascend chose labor hours, instead of machine hours, as the allocation base.
Ascend Company makes three models of jump drives in its
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