Calculation. Building a bicycle is labor intensive. And as such, we think the best way to allocate
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Calculation. Building a bicycle is labor intensive. And as such, we think the best way to allocate overhead is on Direct Labor Hours. At the beginning of the year, we estimate the following annual items:
Warehouse Rent $8,000
Storefront Rent $7,000
Manufacturing Supervisor Salary $40,000
Storefront Supervisor Salary $50,000
Indirect Materials $10,000
Total Machine Hours 29,000 Hours
Total Labor Hours 10,000 Hour
January 10th We start building our first bike. We will call it Job Number 100. We call the storeroom and requisition $500 of raw materials to be directly used on the Job. We also need an additional $200 in raw materials that will be used for indirect materials. Record the journal entry for the transaction:
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