Problem: Veronica Company allocates overhead costs to jobs on the basis of direct labor hours. Its estimated average monthly factory costs for 2005 were as follows:
Average Monthly Costs
Direct material cost $60,000
Direct labor cost 300,000
Overhead cost 180,000
Its estimated average monthly direct labor hours are 20,000. Among the jobs worked on in November 2005 were two jobs, G and H, for which the following information was collected:
Job G Job H
Direct material cost $10,000 $10,000
Direct labor cost 28,000 32,000
Direct labor hours 2,400 2,800
Required:
a. Compute the overhead rate for Veronica Company.
b. Compute the total production costs of jobs G and H.
c. At what amounts would customers be billed if the company's practice was to charge 180 percent of the production of each job?