Direct labor cost $300,000
Direct labor hours 25,000
Machine hours 8,000
Overhead costs $200,000
Depreciation on machinery accounts for 75 percent of the overhead costs. The job-cost sheets show:
Job 9823 Job 9824
Direct material $1,000 $2,000
Direct labor cost $1,400 $1,400
Direct labor hours 150 130
Machine hours 130 270
Determine the overhead allocation rate under the three suggested allocation bases. Round to the two decimal places.
Calculate the cost of Job 9823 and Job 9824 using each of the three bases. Round to two decimal places.
Discuss which allocation base appears preferable.