Kirsten believes her company's overhead costs are driven (affected) by the number of direct labor hours because the production process is very labor intensive. During the period, the company produced 5,000 units of Product A requiring a total of 1,600 labor hours and 2,500 units of Product B requiring a total of 400 labor hours. What allocation rate should be used if the company incurs overhead costs of $20,000?
A. $12.50 per labor hour for Product A and $50 per labor hour for Product B
B. $2.67 per unit
C. $10 per labor hour
D. None of these.
Answer: C
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