Overhead Allocation and Cost Management

Data: WXY Consulting allocates overhead costs based on direct labor hours. The following information is available:

• Total overhead costs: $200,000
• Total direct labor hours: 10,000

Requirements:

1. Calculate the overhead allocation rate per direct labor hour.
2. Allocate overhead costs to two projects: Project A with 3,000 direct labor hours and Project B with 5,000 direct labor hours.
3. Discuss the challenges of overhead allocation based on direct labor hours at WXY Consulting.
4. Analyze how misallocation of overhead costs can impact project profitability.
5. Evaluate alternative methods for overhead allocation at WXY Consulting.