Question

The following information was drawn from the accounting records of Marlin Manufacturing Co. Product 1 Product 2 Product 3 $65,000 $70,000 $75,000 Direct Material Cost $110,000 $120,000 $130,000 Direct Labor Cost Direct Labor Hours 2,800 hours 3,400 hours 3,600 hours Factory overhead is estimated to be $234,000 and is applied on a basis of direct labor dollars. This overhead cost is not traceable to any particular product. Factory overhead allocated to Product 2 is______________.a. $9,600b. $71,500c. $78,000d. $78,800

Answer 1

Answer:

Option (c) is correct.

Explanation:

Given that,

Information for product 2 is as follows:

Direct Material Cost = $70,000

Direct Labor Cost = $120,000

Direct Labor Hours = 3,400

Estimated factory overhead = $234,000

Overhead rate:

= Total Overhead ÷ Total labor cost

= $234,000 ÷ ($110,000 + $120,000 + $130,000)

= $234,000 ÷ $360,000

= 0.65 or 65% of direct labor cost

Factory overhead allocated to Product 2:

= Direct Labor Cost for product 2 × Overhead rate

= $120,000 × 65%

= $78,000