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Mexican Spices Company makes two types of salsa, hot and mild. Information for the two flavors appears below:

Hot Mild
Sales $400,000 $600,000
Direct materials $100,000 $200,000
Direct labor $50,000 $150,000
Labor hours 5,000 10,000
Mexican Spices incurred $240,000 in overhead costs for the period.

Assume that Mexican Spices allocates overhead cost to products based on the labor hours worked on each product. What is the overhead application rate?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M948873

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