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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?
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Foam Pet Mattress Company can sell as many pet bed models A and B that it can produce, but the company has limited production capacity. It can produce two units of A or three units of B per hour and it has 4,000 production hours available.
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