Harrison Company Expects to Incur $600,000 in Manufacturing Overhead for the Coming

Essay

Harrison Company expects to incur $600,000 in manufacturing overhead for the coming year.The company makes two products,A and B,and it has accumulated the following budget information for the products:
$$\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Nurnber of units to be produced } & 10,000 & 5,000 & 15,000 \\\hline \text { Direct labor hours } & 25,000 & 5,000 & 30,000 \\\hline \text { Machine hours } & 15,000 & 30,000 & 45,000 \\\hline\end{array}$$ Required:
1)Use direct labor hours as the cost driver to compute the allocation rate.Determine the amount of budgeted overhead to be allocated to each unit of product A.(Round to the nearest cent.)
2)Use machine hours as the cost driver to compute the allocation rate.Determine the amount of budgeted overhead to be allocated to each unit of product A.(Round to the nearest cent.)
3)How should Harrison decide between machine hours and direct labor hours as the cost driver for its manufacturing overhead?