Zela Company is preparing its annual profit plan. As part of its analysis of the

Question

Zela Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below.

Budgeted material handling costs: $1,166,000

Under a traditional costing system that allocates overhead on the basis of direct labor hours, the materials handling costs allocated to one unit of wall mirrors would be:

$41,643.

$2,300.

$5,600.

$116,380.

Wall Mirrors Speciality Windows   Units produced 220        200           Material moves per product line 23        33           Direct labor hours per product line 5,060        6,600        

Explanation / Answer

materials handling costs allocated to one unit of wall mirror

=Budgeted cost/Budgeted hours*Direct labours for wall mirrors/total units of wall mirrors

=1166000/11660*5060/220

=2300

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