Question

1. Multiple Production Department Factory Overhead Rate Method

   Handy Leather, Inc., produces three sizes of sports gloves: small, medium, and large. A glove pattern is first stenciled onto leather in the Pattern Department. The stenciled patterns are then sent to the Cut and Sew Department, where the glove is cut and sewed together. Handy Leather uses the multiple production department factory overhead rate method of allocating factory overhead costs. Its factory overhead costs were budgeted as follows:

   Pattern Department overhead		$294,000
   Cut and Sew Department overhead		560,000
   	Total	$854,000

   The direct labor estimated for each production department was as follows:

   Pattern Department		42,000	direct labor hours
   Cut and Sew Department		56,000
   	Total	98,000	direct labor hours

   Direct labor hours are used to allocate the production department overhead to the products. The direct labor hours per unit for each product for each production department were obtained from the engineering records as follows:

   Production Departments	Small Glove		Medium Glove		Large Glove
   Pattern Department	0.30		0.20		0.45
   Cut and Sew Department	0.40		0.55		0.70
   Direct labor hours per unit	0.70		0.75		1.15

   If required, round all per unit answers to the nearest cent.

   a. Determine the two production department factory overhead rates.

   Pattern department	$ per dlh
   Cut and Sew department	$ per dlh

   b. Use the two production department factory overhead rates to determine the factory overhead per unit for each product.

   Small glove	$ per unit
   Medium glove	$ per unit
   Large glove	$ per unit

Answer 1

a.
Pattern Department [ 294000 / 42000 ]	7	per dlh
Cut and Sew department [ 560000 / 56000 ]	10	per dlh

b.
Overhead allocation :	Small glove	Medium glove	Large glove
Pattern department	2.10 [ 7*0.30 ]	1.40 [ 7*0.20 ]	3.15 [ 7*0.45 ]
Cut and Sew department	4.00 [ 10*0.40 ]	5.50 [ 10*0.55 ]	7.00 [ 10*0.70 ]
Factory overhead per unit	6.10	6.90	10.15