Sable Company Is Debating the Use of Direct Labor Cost

question 216

Multiple Choice

Sable Company is debating the use of direct labor cost or direct labor hours as the cost allocation base for allocating manufacturing overhead.The following information is available for the most recent year: $$\begin{array} { | l | l | } \hline \text { Estimated direct labor cost } & \$ 500,000 \\\hline \text { Actual direct labor cost } & \$ 450,000 \\\hline \text { Estimated manufacturing overhead costs } & \$ 400,000 \\\hline \text { Actual manufacturing overhead costs } & \$ 350,000 \\\hline \text { Estimated direct labor hours } & 250,000 \\\hline \text { Actual direct labor hours } & 245,000 \\\hline\end{array}$$
- If Sable Company uses direct labor hours as the allocation base,what would the predetermined manufacturing overhead rate be?

• A)$1.60 per direct labor hour
• B)$1.40 per direct labor hour
• C)$1.43 per direct labor hour
• D)$1.63 per direct labor hour

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Definitions:

Choice

The act of selecting between two or more possibilities.

Rational Decision-Making

A systematic process of defining problems, evaluating alternatives, and choosing optimal solutions based on logical reasoning and factual evidence.

Reliance Upon Others

The act of depending on others for support, help, or sustenance in various aspects of life or specific tasks.

Information Overload

The reception of more information than is necessary to make effective decisions.