Factory overhead is estimated to be $30,000 and is applied based on direct labor
ID: 2527472 • Letter: F
Question
Factory overhead is estimated to be $30,000 and is applied based on direct labor hours. This overhead cost is not traceable to any particular product.
1. Factory overhead allocated to Product 2 is,
a) $4,800
b) $7,500
c) $10,000
d) $10,800
2. The total product cost of Product 1 is,
a) $7,200
b) $62,200
c) $56,200
d) $62,500
The answers are D and B, respectively, but if you can explain how to get these answers in detail/with equations, that would be great. Thanks!
Product 1 Product 2 Product 3 Direct Material Cost $25,000 $30,000 $35,000 Direct Labor Cost $30,000 $40,000 $50,000 Direct Labor Hours 1,200 hours 1,800 hours 2,000 hoursExplanation / Answer
1.Factory overhead allocated to Product 2 is D) $10800
=TOTAL FACTORY OVERHEAD / TOTAL DIRECT LABOUR HOURS X DIRECT LABOUR HOURS ALLOCATED TO PRODUCT 2
=30000 / (1200+1800+2000)X1800 = $10800
2. The total product cost of Product 1 is, B.$62200
Factory overhead allocated to Product 1 :
=TOTAL FACTORY OVERHEAD / TOTAL DIRECT LABOUR HOURS X DIRECT LABOUR HOURS ALLOCATED TO PRODUCT 1
=30000 / (1200+1800+2000)X1200 = $7200
TOTAL COST = DIRECT MATERIAL COST (PRODUCT 1) + DIRECT LABOUR COST (PRODUCT 1) + FACTORY OVERHEAD COST (PRODUCT 1)
=25000+30000+7200 = $62200
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