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 80 machine hours, 240 direct labor hours, and 10 inspection hours. How much MOH would be allocated using the newly derived activity-based rates?
A) $2,000.00
B) $2,700.00
C) $4,080.00
D) $4,140.00

Question

Quizplus · Accepted Answer

To calculate the allocated MOH, multiply the activity rates against their respective actual usages. Machine hours, $18.00 per machine hour times 80 machine hours ($1,440.00) plus Direct labor hours, $11.00 per direct labor hour times 240 direct labor hours ($2,640.00) plus Inspection hours, $6.00 per inspection hour times 10 inspection hours ($60.00). The total MOH for all activities is $4,140.00 (Choice D).

Melissa Is the Controller for Barker Inc