1. Zeta Pharmaceuticals

Scenario: Cost Allocation Methods

Data: Zeta Pharmaceuticals allocates overhead costs using direct labor hours and machine hours. The following data is available for the year:

• Total Overhead Costs: $500,000
• Direct Labor Hours: 20,000
• Machine Hours: 15,000

Requirements: Allocate overhead costs using both direct labor hours and machine hours. Calculate the overhead rate per unit of direct labor hour and machine hour. Compare the differences in cost allocation between the two methods and discuss the advantages of each method for Zeta Pharmaceuticals.