Overhead Costs Type Cost Choice Hotels Sales, Production, and Cost Information Standard Guest Room Type Junior Suite Presidential Suite Room Volume 150 110 25 Price $140,000 $240,000 $1,050,000 Unit costs Depreciation Maintenance Purchasing $3,200,000 $1,800,000 $320,000 Direct materials $30,000 $92,000 $310,000 Inspection $850,000 Direct labor $54,000 $85,000 $640,000 Indirect materials $490,000 Manufacturing Supervision $1,700,000 $30,000 $30,000 $30,000 overhead Supplies $ 190,000 Total unit cost $114,000 207000 $980,000 Total manufacturing overhead cost $8,550,000 Unit gross profit $ 26,000 $33.000 $70,000 Note: Manufacturing overhead costs are fixed. They do not vary with the volume of manufacturing activity. 1,200 1,300 5,940 Direct labor hours Rate per hour $45,00 $65.38 $107.74 #of Rooms Total Overhead % of total Overhead Answer Questions 1 and 2 Below: 1 Total manufacturing overhead costs Rate per unit Standard Junior Presidential Labor Hours Units Total labor Hours Total Cost of labor % of labor per unit % of total labor % of overhead per unit ABC Allocated Costs 2 Standard Junior Presidential Totals Questions: 1. The cost-allocation system Choice Hotels has been using allocates over 90 percent of overhead costs to the Standard Guest Room and the Junior Suite, because over 90 percent of the models produced were one of these two models. How much overhead was allocated to each of the three models last year? Discuss why this might not be an accurate way to assign overhead costs to products. 2. Choice Hotels' production manager proposes allocating overhead by direct labor hours instead, since the different models require different amounts of labor. How much overhead would be allocated to each guest room (per unit and in total) using this method? Show all supporting calculations