Burton Company uses a normal costing system. The company uses direct labor-hours as the cost-allocation base. The following information is available for the company: Budgeted manufacturing overhead costs $2,000 Budgeted labor hours 800 Actual manufacturing overhead costs $1,500 Actual labor hours 500 Calculate the allocated direct manufacturing overhead costs of Job 56 if 10 direct-labor hours were used for the job.

the allocated direct manufacturing overhead costs of Job 56 is $25

Explanation:

Overheads in manufacturing process are allocated to jobs or products using cost drivers or surrogates.

First Step : Determine the Pre-determined Overhead rate

Pre-determined Overhead rate = Budgeted Overheads / Budgeted Activity

= $2,000 / 800

= $ 2.50 per labor hour

Step 2 : Determined the Amount of Overhead allocated to Job 56 based on labor hours utilised

Overhead for Job 56 = Pre-determined Overhead rate * Hours Used

= $ 2.50 * 10

= $25