Allocating to smooth cost over varying levels of production
Production workers for Nabors Manufacturing Company provided 280 hours of labor in January and 500 hours in February. Nabors expects to use 4,000 hours of labor during the year. The rental fee for the manufacturing facility is $8,000 per month.
Required
Explain why allocation is needed. 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?
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