Question

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: $294,000 Pattern Department overhead Cut and Sew Department overhead 560,000 Total $854,000 The direct labor estimated for each production department was as follows: Pattern Department Cut and Sew Department 42,000 direct labor hours 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 Direct labor hours per unit 0.70 0.75 If required, round all per unit answers to the nearest cent. a. Determine the two production department factory overhead rates.

Answer 1

Answer:

A)

Production Department Factory overhead rate

Overheads rate

= Estimated overhead/Estimated allocation base

= Estimated overhead/Direct labour hours

	Pattern Department	Cut and Sew Department
Budgeted Overhead (A)	294000	560000
Direct Labour Hours(B)	42000	56000
Factory overhead rate(C=A/B)	7	10

So the answer is

Pattern Department	7	Per DLh
Cut and Sew Department	10	Per DLh

2)

Calculation of factory overhead per unit

Particulars	Small Glove	Medium Glove	Large Glove
Pattern Department	2.1	1.4	3.15
	(0.30*$7)	(0.20*$7)	(0.45*$7)
Cut and Sew Department	4	5.5	7
	(0.40*$10)	(0.55*$10)	(0.70*$10)
Total Factory Overhead Per unit	6.1	6.9	10.15

So the answer is

Small Glove	6.1	Per unit
Medium Glove	6.9	Per unit
Large Glove	10.15	Per unit