ACCT $254$

Single Rate Overhead Allocation Assignment

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:

$\backslash$table$[[,$Product A$,$Product B$,$Total$],[\backslash$table$[[$Number of units to be$],[$produced$]],10,000,5,000,15,000],[$Direct labor hours,$25,000,5,000,30,000],[$Machine hours,$15,000,30,000,45,000]]$

Required:

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$.$

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$.$

How should Harrison decide between machine hours and direct labor hours as the cost driver for its manufacturing overhead?