1. Assume a manufacturer incurs 2,000,000 hours of direct productive labor in a year at a total direct labor cost of $50,000,000. The total manufacturing indirect expense for the same period is $67,500,000.
a. What is the average direct labor hour rate?
b. If the overhead were distributed on the basis of direct labor hours, what would the rate be per hour?
c. If the overhead were distributed on the basis of direct labor dollars, what would the percentage rate be?
2. Using the same factors as above, assume that we have two projects each requiring 100,000 direct labor hours. On Project A, because of work requirements and personnel assigned, direct labor costs of $2,040,000, or $20.40 per hour, were experienced. Project B, on the other hand, requires a direct labor cost of $2,800,000, or $28.00 per hour. Calculate the amount of overhead that would be allocated to these two projects on a labor hour and a dollar basis.
Direct Labor Direct Labor
Hour Method Dollar Method
Project A $_____________ $____________
Project B $_____________ $____________
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