Melissa is the controller for Barker Inc., a factory that creates unique dog chew toys. Until now, Barker has been using a single plant-wide rate of $10.75 per direct labor hour to allocate Manufacturing Overhead (MOH) costs. Melissa has been debating a switch to activity-based costing and has derived the following activity-based rates:
$18)00 per machine hour
$11)00 per direct labor hour
$6)00 per inspection hour
A recent production run used 65 machine hours, 186 direct labor hours, and 13 inspection hours. How much MOH would be allocated using the newly derived activity-based rates?
A) $2,821.00
B) $3,216.00
C) $3,294.00
D) $4,596.00

Question

Quizplus · Accepted Answer

To calculate the allocated MOH, multiply the activity rates against their respective actual usage. Machine hours, $18.00 per machine hour times 65 machine hours ($1,170.00) plus Direct labor hours, $11.00 per direct labor hour times 186 direct labor hours ($2,046.00) plus Inspection hours, $6.00 per inspection hour times 13 inspection hours ($78.00). The total MOH for all activities is $3,294.00 (Choice C).

Melissa Is the Controller for Barker Inc