Winter Manufacturing Has Four Categories of Overhead

question 23

Multiple Choice

Winter Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are listed as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. 100,000 direct labour hours are budgeted for next year.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers/allocation bases. Expected activity for the four cost drivers that would be used are:
What is the amount of overhead allocated to the proposed job if Winter Manufacturing uses direct labour hours as its only cost driver?

• A) £41,200
• B) £30,400
• C) £30,000
• D) £20,800