Final answer:
To calculate the total cost of Product 1, you need to add the direct material cost, direct labor cost, and the overhead cost. The overhead cost is applied on the basis of direct labor dollars.
Step-by-step explanation:
To calculate the total cost of Product 1, we need to add the direct material cost, direct labor cost, and the overhead cost. The direct material cost for Product 1 is $25,000, the direct labor cost is $30,000, and the overhead cost is $30,000. Since the overhead cost is applied on the basis of direct labor dollars, we can calculate it by multiplying the direct labor cost by the overhead rate:
Overhead cost = Direct labor cost x overhead rate
Overhead cost = $30,000 x ($30,000 / ($30,000 + $40,000 + $50,000))
Now we can calculate the total cost of Product 1 by summing up the direct material cost, direct labor cost, and overhead cost:
Total cost of Product 1 = Direct material cost + Direct labor cost + Overhead cost
Total cost of Product 1 = $25,000 + $30,000 + Overhead cost
First, we need to calculate the overhead rate by dividing the total estimated factory overhead by the total direct labor dollars. The total direct labor dollars are $30,000 for Product 1, $40,000 for Product 2, and $50,000 for Product 3, which sums up to $120,000. The estimated factory overhead is $30,000. Therefore, the overhead rate is $30,000 / $120,000, which equals 0.25 or 25%.
To find the allocated overhead for Product 1, multiply the Direct Labor Cost by the overhead rate: $30,000 x 0.25 = $7,500. Adding this to the Direct Material Cost ($25,000) and the Direct Labor Cost ($30,000) gives us the total cost of Product 1: $25,000 + $30,000 + $7,500 = $62,500.