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Production workers for Essa Manufacturing Company provided 300 hours of labor in January and 600 hours...

Production workers for Essa Manufacturing Company provided 300 hours of labor in January and 600 hours in February. Essa expects to use 5,000 hours of labor during the year. The rental fee for the manufacturing facility is $6,000 per month. Required Based on this information, how much of the rental cost should be allocated to the products made in January and to those made in February? (Do not round intermediate calculations.)

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Answer #1

Total Rental Cost for the Year = $ 6,000 * 12 Months

= $ 72,000

Total labor hours expected = 5,000 Hours

Hence, the Predermined Rate = Total Rental Cost for the Year / Total labor hours expected

= $ 72,000 / 5,000 Hours

= $ 14.40 Per Hour

The rental cost should be allocated to the products in January =Predermined Rate * hours of labor in January

= $ 14.40 Per Hour * 300 Hours

= $ 4,320

The rental cost should be allocated to the products in February =Predermined Rate * hours of labor in February

= $ 14.40 Per Hour * 600 Hours

= $ 8,640

Hence the correct answer is $ 4,320 for January and $ 8,640 for February.

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