Reference no: EM13480124

Custom Auto Parts manufactures parts to order for antique cars. Custom Auto Parts makes everything from fenders to engine blocks. Each customer order is treated as a job. The company currently has two jobs, No. 9823 and No. 9824 that are complete, although overhead has not yet been applied. The company wants to know what each job's cost would be under alternative overhead allocation rates based on: (1) direct labor cost, (2) direct labor hours, and (3) machine hours. Estimates for this year are as follows:

• Direct labor cost $300,000Direct 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

1. Determine the overhead allocation rate under the three suggested allocation bases. Round to the two decimal places.
2. Calculate the cost of Job 9823 and Job 9824 using each of the three bases. Round to two decimal places.
3. Discuss which allocation base appears preferable.