Allocating Indirect Costs

My House / Your House

	House 1	House 2	House 3
Direct Materials	$140,000	$70,000	$90,000
Direct Labor	210,000	130,000	60,000
Overhead*	?	?	?

*The building contractors total indirect costs (such as supervisory salaries and indirect materials) amount to $84,000.

My new house is house number one. I believe distributing the contractors overhead costs equally among the three houses is a fair way to allocate them. My specific recommendation is: $84,000 overhead / 3 houses = $28,000 per house. Your new house is house number three. Do you agree with this assignment of cost and why?