Dartmouth Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Standard 13 7 255 Deluxe 33 14 235 Overhead costs $ 64 comma 400 $ 71 comma 400 Assume a traditional costing system applies the overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the deluxe model

The total amount of overhead costs assigned to the deluxe model is $64,745.

Explanation:

Traditional Costing System:

According to Traditional costing system, the overhead cost or indirect cost is allocated on the basis of total direct labors hours, total number of units, etc.

Overhead cost : The cost which is not related to the day to day expenses. Like - depreciation,. insurance, etc.

Steps to compute the total amount of overhead costs assigned to the deluxe model:

Step 1 : First we have to calculate the total overhead cost.

Step 2 : Now, allocation the total overhead cost to the total direct labors

Step 3 : After applying the above two steps, the answer is come.

Calculation is shown below:

Step 1 : Total overhead cost = Standard + Deluxe

= $64,000 + $71,000

= $135,000

Step 2: The total direct labors = Standard + Deluxe

= 255 + 235

= 490

After calculating above steps, the allocation for Deluxe is displayed below

= Total Overhead cost * Deluxe direct labors : Total direct labors

= $135,000 * (235 : 490)

= $64,745

Thus, the total amount of overhead costs assigned to the deluxe model is $64,745.