Question

Layla has been allocating MOH costs to their three different products using a single plant-wide rate of $19 per DL hour. Their controller has suggested a switch to the following activity-based rates: $10 per production run, $15 per direct labor hour and $12 per inspection hour. If the most recent job required 5 production runs, 150 DL hours and 5 inspection hours, how much MOH would be allocated using the ABC method?

Answer 1

To calculate the MOH using the ABC method, multiply each activity rate by the respective activity level for the job and sum the results.

Step-by-step explanation:

To calculate the MOH using the ABC method, we need to use the activity-based rates given. The rates are $10 per production run, $15 per direct labor hour, and $12 per inspection hour. Multiply each activity rate by the respective activity level for the job. For the most recent job requiring 5 production runs (5 x $10 = $50), 150 DL hours (150 x $15 = $2,250), and 5 inspection hours (5 x $12 = $60), the total MOH allocated using ABC method is $2,360.