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Buren Company manufactures two products, Regular and Supreme. Buren's overhead costs consist of machining, $2,000,000; and assembling, $1,000,000. Information on the two products is: Regular Supreme
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000
Overhead applied to Regular using traditional costing using direct labor hours is
A) $860,000.
B) $1,200,000.
C) $1,800,000.
D) $2,140,000.

Respuesta :

Overhead applied to Regular using traditional costing using direct labor hours is  $2,140,000. So option d is the correct option of the given statement.

Why is it called overhead costs?

These expenses are classified as overheads since they have no direct connection to any specific organizational function and don't immediately generate any revenue. Instead, these expenses simply serve as the foundation for all other operations of the company.

How are operating expenses determined?

Divide the indirect costs by the direct costs, then multiply by 100 to get the overhead rate. If your overhead rate is 20%, then means that 20% of your company's income is spent on the creation of products or the provision of services. An efficient business will generate more revenue with a lower overhead rate.

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