(CMA)Flagler Corporation 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 assigned to the individual product lines from the information given as follows: Wall Mirrors Specialty Windows
Units produced 25 25
Material moves per product line 5 15
Direct labour hours per unit 200 200
Budgeted materials handling costs are $50,000.
Under a costing system that assigns overhead on the basis of direct labour 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

Quizplus · Accepted Answer

The total direct labor hours for both products is 25 units * 200 hours/unit + 25 units * 200 hours/unit = 10,000 hours. The overhead rate per direct labor hour is $50,000 / 10,000 hours = $5/hour. For one unit of wall mirrors, the overhead cost is 200 hours * $5/hour = $1,000.

(CMA)Flagler Corporation Is Preparing Its Annual Profit Plan