Question

The controller of Hallowell Company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below:

Wall Mirrors Specialty Windows
Total expected units produced 2,000 7,000
Total expected material moves 100 600
Expected direct labor-hours per unit 7 4

The total materials handling cost for the year is expected to be $18,257.40.

If the materials handling cost is allocated on the basis of direct labor-hours, how much of the total materials handling cost would be allocated to the wall mirrors?

a. $9,129
b. $3,961
c. $6,086
d. $11,618

Answer 1

The correct answer is C.

Step-by-step explanation:

Giving the following information:

Wall Mirrors Specialty Windows

Total expected units produced 2,000 7,000

Expected direct labor-hours per unit 7 4

The total materials handling cost for the year is expected to be $18,257.40.

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Total direct labor hours= 2,000*7 + 7,000*4= 42,000

Predetermined manufacturing overhead rate= 18,257.4/42,000

Predetermined manufacturing overhead rate= $0.4347 per direct labor hour

Now, we can allocate overhead:

Allocated overhead= 0.4347*14,000= $6,086