Merry Co. has two major categories of factory overhead: material handling and quality control. The costs expected for these categories for the coming year are:
Material handling ... $120,000
Quality inspection ... 200,000
The plant currently applies overhead based on direct labor hours. The estimated direct labor hours are 80,000 per year. The plant manager is asked to submit a bid and assembles the following data on a proposed job:
Direct materials ...... $4,000
Direct labor (2,000 hours) .. 6,000
What amount is the estimated product cost on the proposed job?
a. $8,000
b. $10,000
c. $14,000
d. $18,000