Question

Obj. 3 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 Cut and Sew Department overhead Total $294,000 560,000 $854,000 The direct labor estimated for each production department was as follows: Pattern Department Cut and Sew Department Total 42,000 direct labor hours 56,000 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 Pattern Department Cut and Sew Department Direct labor hours per unit Small Glove 0.30 0.40 Medium Glove 0.20 0.55 Large Glove 0.45 0.70 1.15 0.70 0.75 a. Determine the two production department factory overhead rates. b. Use the two production department factory overhead rates to determine the factory overhead per unit for each product.

Answer 1

				Pattern	Cut and Sew
a)				Department	Department
	Factory OH			$ 294,000.00	$ 560,000.00
	Direct Labor Hours			42000	56000
	Production department rate			$             7.00	$           10.00

					Prod. Dept.		Factory
b)			DLH per unit	x	Rate	=	Overhead
	Small Glove:
	Pattern Dept.		0.3		$         7.00		$      2.10
	Cut and Sew Dept.		0.4		$      10.00		$      4.00
	Total Factory OH p.u						$      6.10
	Medium Glove:
	Pattern Dept.		0.2		$         7.00		$      1.40
	Cut and Sew Dept.		0.55		$      10.00		$      5.50
	Total Factory OH p.u						$      6.90
	Large Glove:
	Pattern Dept.		0.45		$         7.00		$      3.15
	Cut and Sew Dept.		0.7		$      10.00		$      7.00
	Total Factory OH p.u						$   10.15

Is this correct?