Donna Hats Inc. manufactures three different styles of hats: Vogue, Beauty, and Deluxe. Donna expects to incur \($600,000\) of overhead cost during the next fiscal year. Other budget information follows.

Required:

a. Use direct labor hours as the cost driver to compute the allocation rate and the budgeted overhead cost for each product.

b. Use machine hours as the cost driver to compute the allocation rate and the budgeted overhead cost for each product.

c. Describe a set of circumstances where it would be more appropriate to use direct labor hours as the allocation base.

d. Describe a set of circumstances where it would be more appropriate to use machine hours as the allocation base.

Transcribed Image Text:

Vogue Beauty Deluxe Total Direct labor hours Machine hours 3,000 5,000 4,500 12,500 1,000 1,000 1,000 3,000