The total materials handling cost for the year is expected to be $218,790. If th

Question

The total materials handling cost for the year is expected to be $218,790.

If the materials handling cost is allocated on the basis of direct labor-hours, how much of the total materials handling cost would be allocated to the prefab barns? (Round off your answer to the nearest whole dollar.)  

The answer is $68,640 for your convinience. What I did was 200/900 * 218790 but apparently it's not the right way to do it. Please elaborate the calculation step by step. Thank you!

Explanation / Answer

The secret is how much each product use the total available direct labor hours and not the 1 unit only.

Modular Homes      5,000 units X 700 DLH per unit   = $3,500,000
Prefab Barns          8,000 units X 200 DLH per unit  = $1,600,000
so the ratio is 35 : 16

Allocating Total materials handling cost on this basis:
Prefab Barns        $218,790 x 16 / 51         =    $68,640
Modular Homes       $218,790 x 35 / 51         = $150,150  
                              Total                              $218,790

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