Alberto Manufacturing Company is in the process of developing a plant-wide overhead rate for the assignment of factory overhead costs to jobs. Alberto has two options for allocation base (cost drivers) direct labor hours (DLH) and direct materials cost (DMC). Alberto has compiled data for the past several months that are on the Excel file sheet named Cost Accounting. What is the appropriate allocation base for the assignment of factory overhead costs to jobs at Alberto Company? Why? Refer to your computed R Squares in your answer and the interpretation.
| Overhead Cost |
DLH |
Materials Cost |
| $678,145 |
948 |
$491,618 |
| $658,200 |
767 |
536,311 |
| $737,981 |
927 |
715,081 |
| $618,309 |
758 |
473,742 |
| $638,254 |
853 |
482,680 |
| $538,527 |
569 |
491,618 |
| $797,818 |
805 |
759,774 |
| $578,418 |
626 |
482,680 |
| $598,363 |
683 |
487,149 |
| $718,036 |
773 |
581,003 |
| $698,090 |
760 |
625,696 |