Parr Corporation Makes Three Products, X, Y, and Z Parr Uses Direct Labor Hours as the Cost Driver to Overhead

Essay

Parr Corporation makes three products, X, Y, and Z. Expected overhead costs for the coming year include: $$\begin{array} { | l | r | } \hline \text { Depreciation on factory building } & \$ 140,000 \\\hline \text { Factory utility costs } & 160,000 \\\hline \text { Supervisory salaries } & 250,000 \\\hline \text { Factory supplies } & 50,000 \\\hline \text { Total } & \$ 600,000 \\\hline\end{array}$$
Parr uses direct labor hours as the cost driver to allocate overhead costs. Budgeted direct labor hours for each product are:
Product X, 15,000 direct labor hours
Product Y, 10,000 direct labor hours
Product Z, 5,000 direct labor hours
Required:
1) Determine the amount of manufacturing overhead that should be allocated to each of the three products.
2) Assume that each unit of Product X requires $40 in direct materials and 3 direct labor hours at a rate of $15 per hour. Calculate the budgeted or expected cost of each unit of X.