Question

Performance Gloves, 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. Performance Gloves 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		$108,300
Cut and Sew Department overhead		182,400
	Total	$290,700

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

Pattern Department		1,900	direct labor hours
Cut and Sew Department		2,400
	Total	4,300	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	0.04		0.05		0.06
Cut and Sew Department	0.08		0.10		0.12
Direct labor hours per unit	0.12		0.15		0.18

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

Answer a)

Calculation of factory overhead rates of Pattern Department and Cut & Sew Department

Particulars	Pattern Department	Cut and Sew Department
Budgeted factory overheads	$ 108,300	$ 182,400
Estimated Direct Labour Hours	1,900 direct labour hours	2,400 direct labour hours
Overhead rate per direct labour hour	$ 57 per direct labour hour	$ 76 per direct labour hour

Overhead rate of Pattern Department:

Overhead rate = Budgeted overheads of a department/ Estimated direct labour hours of that department

                                          = $ 108,300/ 1,900 direct labour hours

                                         = $ 57 per direct labour hour

Therefore overhead rate of Pattern Department is $ 57 per direct labour hour

Overhead rate of Cut and Sew Department:

Overhead rate = Budgeted overheads of a department/ Estimated direct labour hours of that department

                                          = $ 182,400/ 2,400 direct labour hours

                                         = $ 76 per direct labour hour

Therefore overhead rate of Cut and Sew Department is $ 76 per direct labour hour

Answer b)

Calculation of Overhead rate per unit for each type of glove

Particulars	Small glove	Medium glove	Large glove
Pattern Department (0.04 labour hours X $ 57 per direct labour hour)	$ 2.28
Cut and Sew Department (0.08 labour hours X $ 76 per direct labour hour)	$ 6.08
Pattern Department (0.05 labour hours X $ 57 per direct labour hour)		$ 2.85
Cut and Sew Department (0.10 labour hours X $ 76 per direct labour hour)		$7.60
Pattern Department (0.06 labour hours X $ 57 per direct labour hour)			$ 3.42
Cut and Sew Department (0.12 labour hours X $ 76 per direct labour hour)			$ 9.12
Factory overhead rate per unit	$ 8.36	$ 10.45	$ 12.54

Overhead rate per unit for Small Glove

Overhead rate per unit = (Direct labour hours in pattern department X Overhead rate per labour hour in pattern department) + (Direct labour hours in Cut and Sew department X Overhead rate per labour hour in Cut and Sew department)

                                          = (0.04 direct labour hours X $ 57 per direct labour hour) + (0.08 direct labour hours X $ 76 per direct labour hour)

                                          = $ 2.28 + $ 6.08

                                          = $ 8.36

Therefore overhead rate per unit of Small glove is $ 8.36

Overhead rate per unit for Medium Glove

Overhead rate per unit = (Direct labour hours in pattern department X Overhead rate per labour hour in pattern department) + (Direct labour hours in Cut and Sew department X Overhead rate per labour hour in Cut and Sew department)

                                          = (0.05 direct labour hours X $ 57 per direct labour hour) + (0.10 direct labour hours X $ 76 per direct labour hour)

                                          = $ 2.85 + $ 7.60

                                          = $ 10.45

Therefore overhead rate per unit of Medium glove is $ 10.45

Overhead rate per unit for Large Glove

Overhead rate per unit = (Direct labour hours in pattern department X Overhead rate per labour hour in pattern department) + (Direct labour hours in Cut and Sew department X Overhead rate per labour hour in Cut and Sew department)

                                          = (0.06 direct labour hours X $ 57 per direct labour hour) + (0.12 direct labour hours X $ 76 per direct labour hour)

                                          = $ 3.42 + $ 9.12

                                          = $ 12.54

Therefore overhead rate per unit of large glove is $ 12.54