Markham Company makes two products: Basic Product and Deluxe Product. Annual production and sales are 2,400 units of Basic Product and 2,000 units of Deluxe Product. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Basic Product requires 0.3 direct labor hours per unit and Deluxe Product requires 0.6 direct labor hours per unit. The total estimated overhead for next period is $99,385.

Instructions are listed below.

Explanation:

Giving the following information:

Basic:

Production in units= 2,400

Direct labor hours required= 0.3

Total direct labor hours= 720

Deluxe:

Production in units= 2,000

Direct labor hours required= 0.6

Total direct labor hours= 2,000*0.6= 1,200

The total estimated overhead for the next period is $99,385.

We need to allocate overhead based on direct labor hours.

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 99,385/ (720 + 1,200)= $51.763 per direct labor hour

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Basic:

Allocated MOH= 51.763*720= $37,269.36

Deluxe:

Allocated MOH= 51.763*1,200= $62,115.6

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