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DuraDisc Corporation is applying manufacturing overhead to its product on the basis of direct-labor costs. The company has two products, Standard and High-Grade. The company
DuraDisc Corporation is applying manufacturing overhead to its product on the basis of direct-labor costs. The company has two products, Standard and High-Grade. The company recently start producing the High-Grade product and was expecting a higher increase. Last year's manufacturing overhead was $880,000, based on production of 320,000 units of Standard and 120,000 units of High-Grade. Selling prices were $3.60 per Standard and $5.80 per High-Grade. Direct materials and direct labor costs were as follows:
Standard High-Grade Total Direct Labor . . . . $160,000 $ 80,000 $240,000 Direct Materials . . . 125,000 114,000 239,000Activity Level Costs Assigned Standard High-Grade Total Number of Production Runs . . . $300,000 20 10 30 Quality Tests Performed . . . . . . . . . . 360,000 12 18 30 Shipping Orders Processed . . . 220,000 100 50 150 Total Overhead . . . . . . $880,000Step by Step Solution
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