Psi Electronics

• Psi Electronics is analyzing the cost structure of a new product line.
• Direct materials: $120,000
• Direct labor: $60,000
• Overhead: $30,000
• The company applies overhead based on direct labor hours. Total direct labor hours: 7,000

Requirement: Calculate the overhead rate per direct labor hour and apply it to determine the total cost of the product line. Discuss the advantages and disadvantages of using direct labor hours for overhead allocation.

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