Question

	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 hours

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!

Answer 1

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