Problem 19-1

Veronica Company allocates overhead costs to jobs on the basis of direct labor-hours. Its estimated average monthly factory costs for 2005 were as follows:

Average Monthly Costs

Direct material cost $60,000

Direct labor cost 300,000

Overhead cost 180,000

Its estimated average monthly direct labor-hours are 20,000. Among the jobs worked on November 2005 were two jobs, G and H, for which the following information was collected:

Job G Job H

Direct material cost $10,000 $10,000

Direct labor cost 28,000 32,000

Direct labor-hours 2,400 2,800


a) Compute the overhead rate for Veronica Company.

b) Compute the total production costs of jobs G and H.

c) At what amounts would customers be billed if the company’s practice was to charge 180 percent of the production cost of each job?