Question

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 $135,000 Cut and Sew Department overhead 227,800 Total $362,800 The direct labor estimated for each production department was as follows:Pattern Department 2,700 direct labor hoursCut and Sew Department 3,400 Total 6,100 direct labor hoursDirect 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 GlovePattern 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 Required: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

Answer:

a. Determine the two production department factory overhead rates.

Pattern department = $50 per hour

Cut and sew department = $67 per hour

b. Use the two production department factory overhead rates to determine the factory overhead per unit for each product.

Production                             Small           Medium         Large

Departments                         Glove          Glove             Glove

Pattern Department              $2.00           $2.50           $3.00

Cut and Sew Department     $5.36           $6.70           $8.04

Explanation:

small, medium, large

Pattern Department overhead $135,000

Cut and Sew Department overhead $227,800

Total $362,800

Pattern Department 2,700 direct labor hours

Cut and Sew Department 3,400

Total 6,100 direct labor hours

Overhead rate per hour:

Pattern department = $135,000 / 2,700 hours = $50 per hour

Cut and sew department = $227,800 / 3,400 hours = $67 per hour

Production                             Small           Medium         Large

Departments                         Glove          Glove             Glove

Pattern Department              0.04             0.05              0.06

Per unit ($50)                        $2.00           $2.50           $3.00

Cut and Sew Department     0.08             0.10               0.12

Per unit ($67)                         $5.36           $6.70            $8.04