Question

Sturdivant Fasteners, Co. uses a traditional allocation of overhead based on direct labor hours system. The manager has accumulated the following information on engineering changes, which are indirect cost of their products, for two of the company's major products:

Automotive Fasteners Computer Fasteners
Total units produced 5,000 2,500
Cost per engineering change $400 $ 400
Number of engineering changes 5 25
Direct labor hours per unit 4 4

Compute the cost per unit using: The traditional two-stage allocation of the costs of engineering changes based on direct labor hours.

Answer

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