Production workers for Bianco Manufacturing Company provided 3,600 hours of labor in January and 1,900 hours in February. The company, whose operation is labor intensive, expects to use 32,000 hours of labor during the year. Bianco paid a $96,000 annual premium on July 1 of the prior year for an insurance policy that covers the manufacturing facility for the following 12 months.
Explain why allocation is needed. Based on this information, how much of the insurance cost should be allocated to the products made in January and to those made in February?