Question

The total factory overhead for Urban Styles, Inc. is budgeted for the year at $1,302,000, divided into two departments: Cutting, $1,176,000, and Sewing, $126,000. Urban Styles manufactures two types of men's pants: jeans and khakis. The jeans require three direct labor hours in Cutting and one direct labor hour in Sewing. The khakis require four direct labor hours in Cutting and one direct labor hour in Sewing. Each product is budgeted for 7,000 units of production for the year. When required, round all per unit answers to the nearest cent.

a. Determine the total number of budgeted direct labor hours for the year in each department.

b. Determine the departmental factory overhead rates for both departments.

c. Determine the factory overhead allocated per unit for each product using the department factory overhead allocation rates.

Answer 1

a. Total number of budgeted direct labor hours for the year in each department.
Cutting [Jeans = 7,000 units x 3 hours = 21,000 hours] [Khakis = 7,000 units x 4 hours = 28,000 hours]	49,000 [21,000 + $28,000]	direct labor hours
Cutting [Jeans = 7,000 units x 1 hours = 7,000 hours] [Khakis = 7,000 units x 1 hours = 7,000 hours]	14,000 [7,000 + 7,000]	direct labor hours
b. Departmental factory overhead rates for both departments.
Cutting    [Overhead cost / dlh's = $1,176,000 / 49,000 dlh's]	$24	per dlh
Sewing    [Overhead cost / dlh's = $126,000 / 14,000 dlh's]	$9	per dlh
c. Factory overhead allocated per unit for each product
Jeans [Cutting department = Overhead rate x dlh's = $24 x 3 dlh's = $72] [Sewing department = Overhead rate x dlh's = $9 x 1 dlh = $9]	$81 [$72 + $9]	per pair of jeans
Khakis [Cutting department = Overhead rate x dlh's = $24 x 4 dlh's = $96] [Sewing department = Overhead rate x dlh's = $9 x 1 dlh = $9]	$105 [$96 + $9]	per pair of khakis