Overtime Allocation Albert Machine Tool Company produces tools on a job order basis. During May, two…
Overtime Allocation
Albert Machine Tool Company produces tools on a job order basis. During May, two jobs were completed, and the following costs were incurred:
Job 401
Job 402
Direct materials
$28,000
$37,000
Direct labor: Regular
18,000
23,000
Overtime premium
—
6,000
Other factory costs for the month totaled $16,800. Factory overhead costs are allocated one-third to Job 401 and two-thirds to Job 402.
a. Describe two alternative methods for assigning the overtime premium cost to Jobs 401 and 402 and explain how the appropriate method would be determined.
b. Compute the cost of Job 401 and Job 402 under each of the two methods described in part a.
