A Company allocates materials handling cost to the company\'s two products using

Question

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

                                                       Modular Homes Prefab Barns
Total expected units produced           9,900               16,000
Total expected material moves          1,000                    980
Expected direct labor-hr per unit           560                    490

The total materials handling cost for the year is expected to be $200,000.

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 Prefab Barns?

Explanation / Answer

Total DL hrs = TDL=9900*560 + 16000*490 = 13,384,000 Hrs Total Mat Handling cost (MHC) $200,000 Apportionment of Mat Handing cost to Prefab Barn (PB) = (DL used by PB)*MHC/TDL ie (16000*490)*$200,000/13,384,000 = $117,155 So total materials handling cost would be allocated to the Prefab Barns is $117,155

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