Swimm Company allocates materials handling cost to the company\'s two products u

Question

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

The total materials handling cost for the year is expected to be $72,065.

   1.   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? (Round off your answer to the nearest whole dollar.)

   A)   $16,014

   B)   $19,880

   C)   $36,890

   D)   $36,033

      

2.   If the materials handling cost is allocated on the basis of material moves, how much of the total materials handling cost would be allocated to the modular homes? (Round off your answer to the nearest whole dollar.)

   A)   $36,033

   B)   $57,652

   C)   $56,051

   D)   $35,175

modular homes prefab barns total expected units produced 3000 4000 total expected material moves 400 100 expected direct labor per unit 700 200

Explanation / Answer

1)

Material cost allocated to prefab:

= Material handling cost×Direct labor hours of prefab÷( Direct labor hours of prefab+ Direct labor hours of Modular homes)

= $72,065×(3,000×200)÷(3,000×700+4,000×200)

= $19,880

2)

Material cost allocated to Modular homes:

= Material handling cost×Moves of modular homes÷(Moves of prefab+ Moves of Modular)homes)

= $72,065×400÷(400+100)

= $57,652

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