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At the end of the construction year for his business, Steven's uncle Kenneth is having trouble dealing with the company's indirect costs as there are
At the end of the construction year for his business, Steven's uncle Kenneth is having trouble dealing with the company's indirect costs
as there are just so many of them! To help his uncle and because he hopes to take over the family business one day Steven listed a
few examples of what he thought would be indirect costs for this company: glue, nails, staples, drywall compound, and tape. Kenneth
then added supervisor costs, as well as depreciation of the construction trucks, generators, saws, and other equipment, to the list.
Unfortunately, the total of these MOH costs, $ significantly exceeded Kenneth's budgeted MOH of $
In the past, Kenneth assigned MOH costs to individual jobs based on the direct labor hours of his employees. At the beginning of the
year, based on the work he had planned and still hoped to earn at that time, Kenneth budgeted for DL hours. In reviewing the
payroll records of his employees, Kenneth now sees that they actually worked hours this year while receiving an average
wage of $ per hour. Wow, business must be good!
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