Question:
Allocating costs among products
Bryson Construction Company expects to build three new homes during a specific accounting period. The estimated direct materials and labor costs are as follows.
|
Expected Costs
|
Home 1
|
Home 2
|
Home 3
|
|
Direct labor
|
$ 60,000
|
$ 89,000
|
$196,000
|
|
Direct materials
|
182,000
|
247,000
|
380,000
|
Assume Bryson needs to allocate two major overhead costs ($41,400 of employee fringe benefits and $40,450 of indirect materials costs) among the three jobs.
Required
Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each home.