Hercules Hair Restorer Inc. (HHRI) makes many varieties of hair restoration products which are sold under well-known marketing labels. A single batch contains 10,000 8-oz. bottles and takes two days to make. Typically 15 batches are completed per month, for different brands. Basic cost data for the month of January appears below.

Hercules Hair Restorer Inc. (HHRI) appoints a new CEO, who decides to increase production targets to 200 batches per year. She also hires a management accountant who decides to apply fixed overhead based on normal capacity and does some research into cost behavior. Basic product data still applies. New information appears below.

If HHRI uses for overhead allocation a dual rate system, whereby fixed overhead is allocated on the basis of direct labor hours and variable overhead is allocated on the basis of machine hours, which is true? (Do not round your intermediate calculations.)

• If this scheme is employed, the full cost per batch is $196,762.70

• The overhead rate per DLH is $29.743

• The hourly variable overhead rate is $34.502

• The hourly fixed overhead rate is $215.638

• None of the choices are correct

Bottle Batch Cost per 2 4. Hair by Zeus Oil, fl. oz. Lotion, fl. oz. Zeus potion, fl. oz. Alcemena scent Bottle, cap, label Direct labor, hour Machine hours $ 3 $ 1 $ 24 $ 48 $0.4 January's other expenses Supervision Indirect materials Equipment deprec & repairs Plant manager's salary Utilities $ 8,000 $ 2, 200 $11, 520 $ 6,500 $ 1,800 $33, 020 1/16 1 50 $ 14 8 % fixed 100 60 Estimated overhead for year Supervision Indirect materials Equipment depreciation Equipment repairs Plant manager's salary Utilities 100 $ 96, 000 $ 30, 800 $126, 210 $ 48,000 $ 84, 500 $ 27,000 $412, 540 30 100 20