Kinetic Company estimates that overhead costs for the next year will be $1,600,000 for indirect labor and $400,000 for factory utilities. The company uses direct labor hours as its overhead allocation base, and plans to use 50,000 direct labor hours for this next year. If a product uses 5 direct labor hours, then it will be assigned $200 in overhead costs.
Answer the following statement true (T) or false (F)
True
($1,600,000 + $400,000)/50,000 direct labor hours = $40 per direct labor hour × 5 direct labor hours = $200
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