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Gibson Construction Company expects to build three new homes during a specific accounting period. The estimated...

Gibson Construction Company expects to build three new homes during a specific accounting period. The estimated direct materials and labor costs are as follows: Expected Costs Home 1 Home 2 Home 3 Direct labor $ 80,000 $ 94,000 $ 187,000 Direct materials 92,000 139,000 195,000 Assume Gibson needs to allocate two major overhead costs ($54,150 of employee fringe benefits and $12,780 of indirect materials costs) among the three jobs. Required Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each house. (Round "Allocation rate" to 2 decimal places.)

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Expert Solution

Total direct labor 361000 =80000+94000+187000
Total direct materials 426000 =92000+139000+195000
Allocation rate for fringe benefits 0.15 =54150/361000
Allocation rate for indirect materials 0.03 =12780/426000
Fringe benefits:
House Allocation rate X Weight of Base = Allocated cost
1 0.15 X 80000 = 12000
2 0.15 X 94000 = 14100
3 0.15 X 187000 = 28050
Total 54150
Indirect materials:
House Allocation rate X Weight of Base = Allocated cost
1 0.03 X 92000 = 2760
2 0.03 X 139000 = 4170
3 0.03 X 195000 = 5850
Total 12780
Expected costs Home 1 Home 2 Home 3 Total
Direct labor 80000 94000 187000 361000
Direct materials 92000 139000 195000 426000
Fringe benefits 12000 14100 28050 54150
Indirect materials 2760 4170 5850 12780
Total cost 186760 251270 415900 853930

ekkarill92 answered 1 year ago
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