The controller of Hendershot Corporation estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below: The total materials handling cost for the year is expected to be $6,123.60.If the materials handling cost is allocated on the basis of direct labor-hours, the total materials handling cost allocated to the wall mirrors is closest to: (Do not round your intermediate calculations.)
A) $2,449
B) $4,144
C) $3,499
D) $3,062

Question

The controller of Hendershot Corporation estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below:  The total materials handling cost for the year is expected to be $6,123.60.If the materials handling cost is allocated on the basis of direct labor-hours, the total materials handling cost allocated to the wall mirrors is closest to: (Do not round your intermediate calculations.)
A) $2,449 
B) $4,144 
C) $3,499 
D) $3,062

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate:
Predetermined overhead rate = Estimated overhead cost / Estimated direct labor-hours
Predetermined overhead rate = $6,123.60 / 1,332 direct labor-hours = $4.59 per direct labor hour

Next, we need to allocate the overhead cost to each product based on the direct labor-hours used for each product.
For wall mirrors:
Direct labor-hours for wall mirrors = 720
Overhead cost allocated to wall mirrors = 720 x $4.59 = $3,304.80

For dresser mirrors:
Direct labor-hours for dresser mirrors = 612
Overhead cost allocated to dresser mirrors = 612 x $4.59 = $2,818.68

Therefore, the total materials handling cost allocated to wall mirrors is closest to $3,499 (choice C).

The Controller of Hendershot Corporation Estimates the Amount of Materials