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

Modular Homes Prefab Barns
Total expected units produced 6,200 9,200
Total expected material moves 620 220
Expected direct labor-hours per unit 820 320
The total materials handling cost for the year is expected to be $321,120.

If the materials handling cost is allocated on the basis of direct labor-hours, the total materials handling cost allocated to the prefab barns is closest to: (Round your intermediate calculations to 4 decimal places.)

A. $156,855.00
B. $118,366.98
C. 220,770.00
D. $117,760.00

The correct answer is D.

Explanation:

Giving the following information:

Modular Homes - Prefab Barns

Total expected units produced 6,200 9,200

Expected direct labor-hours per unit 820 320

The total materials handling cost for the year is expected to be $321,120.

First, we need to calculate the total amount of expected direct-labor hours, because it will be used as the allocation base:

Total direct-labor hours= (6,200units*820hours) + (320hours*9,200units)= 8,028,000 hours

Now, we can determine the estimated manufacturing overhead rate:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 321,120/8,028,000= $0.04 per direct labor hour

Finally, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated overhead= 0.04* (320hours*9,200units)= $117,760

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