Theta Constructions

• Theta Constructions has the following costs for a new building project:
  • Direct materials: $400,000
  • Direct labor: $250,000
  • Overhead: $150,000

The company applies overhead based on direct labor hours. The total direct labor hours are 5,000.

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

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