Xi Construction

• Xi Construction is analyzing the cost structure of a new project.
• Direct materials: $600,000
• Direct labor: $350,000
• Overhead: $200,000
• 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 project. Discuss the benefits and limitations of using direct labor hours as the basis for overhead allocation.

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