Question

Multiple production department factory overhead rate method

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:

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

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:

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

Product costing is determining the cost of a product in a systematic basis which consists of primary cost (i.e., usually, labor and material) and overhead costs (i.e., also known as indirect costs).

Multiple production department factory overhead rate method is one of the three methods by which overhead costs incurred by each department vary from other methods. The consumption of overhead and the way it consumes are different in each department.

A.

Compute the departmental factory overhead rates for both departments:

Compute factory overhead rate for pattern department.

Compute factory overhead rate for Cut and Sew department.

B.

Compute factory overhead per unit for each product:

Factory overhead per unit of Small glove.

Factory overhead per unit of Medium glove.

Factory overhead per unit of large glove.