Problem $6-67($Algo$)$ Two$-$Stage Allocation and Product Costing $($LO $6-2,3)$

Hall, Incorporated manufactures two components, Standard and Ultra, that are designed for the same function, but are made of different metals for operational performance reasons. The metal used in Standard is easy to work with and there are few quality issues or reworking required on the machines. The metal used in Ultra is more difficult to work with and often needs additional machine time and rework.

Data on expected operations and direct costs for the next fiscal year follow:

Standard Ultra Total

Units produced $47,00016,00063,000$

Direct labor$-$hours used $141,00022,500163,500$

Machine$-$hours used $23,50022,50046,000$

Direct materials costs $ $3,355,000$ $ $4,951,000$ $ $8,306,000$

Direct labor costs $2,520,000855,0003,375,000$

The planning process team at Hall, Incorporated has estimated the following manufacturing overhead costs for the next fiscal year:

Account Amount

Administration $ $825,400$

Engineering $5,382,000$

Machine operation and maintenance $870,000$

Miscellaneous $540,100$

Supervision $884,500$

Total $ $8,502,000$

The cost accounting system at Hall, Incorporated calculates product costs by adding allocated overhead to the direct costs of the product. Overhead costs are allocated based on direct labor$-$hours.$\text{'}$