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

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Accounting

Solomon Construction Company expects to build three new homesduring a specific accounting period. The estimated direct materialsand labor costs are as follows:

Expected CostsHome 1Home 2Home 3
Direct labor$65,000$99,000$189,000
Direct materials98,000136,000188,000

Assume Solomon needs to allocate two major overhead costs($70,600 of employee fringe benefits and $29,540 of indirectmaterials costs) among the three jobs.

Required

Choose an appropriate cost driver for each of the overhead costsand determine the total cost of each house. (Round"Allocation rate" to 2 decimal places.)

Fringe Benefits:
HouseAllocation RatexWeight of Base=Allocated Cost
1x=$0
2x=0
3x=0
Total$0
Indirect Materials:
HouseAllocation RatexWeight of Base=Allocated Cost
1x=$0
2x=0
3x=0
Total$0
The cost components to determine thetotal cost of each house:
Expected CostsHome 1Home 2Home 3Total
Direct labor$0
Direct materials0
Fringe benefits0
Indirect Materials0
Total cost$0$0$0$0

Answer & Explanation Solved by verified expert
4.1 Ratings (517 Votes)

appropriate cost drivers-

a. fringe benefits = on the basis of direct labor

b. indirect material = on the basis of direct material

fringe benefits-

house allocation rate * weight of base = allocated cost
1 65000/353000*100=18.41% * 70600 = 12997.46
2 99000/353000*100=28.05% * 70600 = 19803.30
3 189000/353000*100=53.54% * 70600 = 37799.24
total * = 70600

indirect material-

house allocation rate * weight of base = allocated cost
1 98000/422000*100=23.22% * 29540 = 6859.188
2 136000/422000*100=32.23% * 29540 = 9520.742
3 188000/422000*100=44.55% * 29540 = 13160.070
total * = 29540

the cost component to determine the total cost of each house-

expected cost house 1 house 2 house 3 total
direct material 98000 136000 188000 422000
direct labor 65000 99000 189000 353000
fringe benefits 12997.46 19803.30 37799.24 70600
indirect material 6859.188 9520.742 13160.070 29540
total 182856.648 264324.042 427959.31 875140

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