Allocating costs among products
Bryson Construction Company expects to build three new homes during a specific accounting period. The estimated direct materials and labor costs are as follows.
|
Expected Costs |
Home 1 |
Home 2 |
Home 3 |
|
Direct labor |
$ 60,000 |
$ 89,000 |
$196,000 |
|
Direct materials |
182,000 |
247,000 |
380,000 |
Assume Bryson needs to allocate two major overhead costs ($41,400 of employee fringe benefits and $40,450 of indirect materials costs) among the three jobs.
Required
Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each home.