The Anazi Leather Company manufactures leather handbags (H) and moccasins (M). T
ID: 2372493 • Letter: T
Question
The Anazi Leather Company manufactures leather handbags (H) and moccasins (M). The company has been using the factory overhead rate method but has decided to evaluate the multiple production department factory overhead rate to allocate factory overhead. The factory overhead estimated per unit together with direct materials and direct labor will help determine selling prices.
Handbags = 60,000 units, 3 hours of direct labor
Moccasins= 40,000 units, 2 hours of direct labor
Total Budgeted factory overhead cost = $360,000
The company has two different production departments: Cutting and Sewing. The cutting department has a factory overhead budget of $80,000. Each unit will require 1 direct labor hour or a total of 100,000 direct labor hours.
The Sewing Department estimates factory overhead in the amount of $280,000. Handbags require 2 hours of sewing time and Moccasins require 1 hour for a total of 160,000 labor hours.
Calculate the amount of factory overhead to be allocated to each unit using direct labor hours.
Moccasins $ Handbags $Explanation / Answer
Calculate the amount of factory overhead to be allocated to each unit using direct labor hours . Handbags = 60,000 units, 2 hours of direct labor ====================================================================== Moccasins= 40,000 units, 3 hours of direct labor ================================================================================================================= Total Budgeted factory overhead cost = $360,000 a. (H) $1.50 , ================================================================================================================================= (M) $1.50 ============================================================================================================================== b. (H) $3.00, (M) $4.50 ======================================================================================================================================== -c. (H) $3.00, (M) $3.00 ===================================================================================================================================== d. (H) $2.40, (M) $2.40 ============================================================================================================================: B Handbags: 60,000 units 2 direct labor hours = 120,000 ================================================================================================ direct labor hours Moccasins: 40,000 units 3 direct labor hours = 120,000 direct labor hours 240,000 direct labor hours =============================================================================== Single plantwide factory overhead rate = $360,000 /240,000 DL hour = $1.50
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.