Question

Merone Company allocates materials handling cost to the company's two products using the below data:

Modular Homes Prefab Barns
Total expected units produced 6,600 9,600
Total expected material moves 660 260
Expected direct labor-hours per unit 860 360

The total materials handling cost for the year is expected to be $228,300. If the materials handling cost is allocated on the basis of direct labor-hours, the total materials handling cost allocated to the prefab barns is closest to:

a. 164,883.33
b. $91,576.16
c. $106,275.00
d. $86,400.00

Answer 1

d. $86,400.00

Step-by-step explanation:

The computation of the total materials handling cost allocated to the prefab barns is given below:

Total Materials Handling Cost is $228,300

Total is

= 6600 ×860 + 9600 × 360

= $5,676,000 + $3,456,000

= $9,132,000

Allocation Rate = Total Materials Handling Cost ÷ Total direct labor hours

= $228,300 ÷ $9,132,000

= $0.025

Now

Total Materials Handling Cost allocated to prefab barns is

= Allocation Rate× direct albor hours for Modular Homes

= $0.025 × $3,456,000

= $86,400