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3 years ago

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

Business

1 answer:

meriva3 years ago

8 0

Answer:

Material handling cost allocated to Prefab Barns= $99,750

Explanation:

Activity-based costing is a form of absorption costing where overheads are charged to product using cost drivers.

Under this method, overheads are first analyzed and categorized by the activities responsible for them and then charged to product based on the amount of benefits enjoyed using cost drivers.

Activity rate per driver is calculated as:

Activity overhead for the period / Total cost drivers for the period

Using direct labour hours, the material handling cost can allocated as follows:

Total direct labour hours

(850 ×6500) +(9500×350) =8850000

Material handing cost allocated to Prefab =

(9500×350)/8850000 × $265,500 =$99750

Material handling cost allocated to Prefab Barns= $99,750

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4 years ago

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