In: Accounting
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:
1 |
Pattern Department overhead |
$266,730.00 |
2 |
Cut and Sew Department overhead |
399,555.00 |
3 |
Total |
$666,285.00 |
The direct labor estimated for each production department was as follows:
Pattern Department | 2,615 | direct labor hours |
Cut and Sew Department | 3,415 | |
Total | 6,030 | 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 | 0.08 | 0.14 | 0.13 |
Cut and Sew Department | 0.11 | 0.16 | 0.14 |
Direct labor hours per unit | 0.19 | 0.30 | 0.27 |
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. If required, round all per-unit answers to the nearest cent. |
a. Basis of allocation of factory overheads is direct labor hours.
Factory overhead rates = Budgeted factory overheads / Estimated direct labor hours
Factory overhead rate of pattern department = $266,730 / 2,615 direct labor hours = $102 per direct labor hour
Factory overhead rate of cut and sew department = $399,555 / 3,415 direct labor hours = $117 per direct labor hour
b. Calculation of factory overhead per unit for each product :
Small Glove | Medium Glove | Large Glove | |
Pattern department [ Direct labor hours per unit in pattern department * Factory overhead rate of pattern department ] |
$8.16 [ 0.08 hours * $102 ] |
$14.28 [ 0.14 hours * $102 ] |
$13.26 [ 0.13 hours * $102 ] |
Cut and sew department [ Direct labor hours per unit in cut and sew department * Factory overhead rate of cut and sew department ] |
$12.87 [ 0.11 hours * $117 ] |
$18.72 [ 0.16 hours * $117 ] |
$16.38 [ 0.14 hours * $117 ] |
Factory overhead per unit | $21.03 | $33 | $29.64 |