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.(CMA based) Budgeted material handling costs: $50,000 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:
A)$1,000.
B)$500.
C)$2,000.
D)$5,000.

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.(CMA based)  Budgeted material handling costs: $50,000 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:
A)$1,000. 
B)$500. 
C)$2,000. 
D)$5,000.

Quizplus · Accepted Answer

Since the problem only gives us the budgeted material handling costs and no information about direct labor hours or the total overhead costs, we cannot accurately allocate overhead using a traditional costing system. Therefore, the answer is simply half of the total material handling costs allocated evenly to each unit, which would be $500 per unit. This assumes that all products require the same amount of material handling costs, which may not necessarily be true in practice.

Zela Company Is Preparing Its Annual Profit Plan