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 6,400 9,400
Total expected material moves 640 240
Expected direct labor-hours per unit 840 340
The total materials handling cost for the year is expected to be $300,020. If the materials handling cost is allocated on the basis of material moves, the total materials handling cost allocated to the modular homes is closest to:

Answer 1

Answer:

The total material handling cost allocated to Modular homes is closest to $218195.2

Explanation:

To determine the cost of material handling allocated to Modular homes, we first need to calculate the overhead absorption rate for materials handling cost based on the activity driver of material moves.

The overhead absorption rate or OAR:

OAR = Budgeted Overheads / Budgeted activity level

OAR-macterials handling = 300020 / (640+240) = $340.93 / material move

The total materials handling overheads allocated to Modular homes will be,

Total Overheads to modular homes = 340.93 * 640  =  $218195.2