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In: Operations Management

Multiple Production Department Factory Overhead Rates The total factory overhead for Urban Styles, Inc. is budgeted...

Multiple Production Department Factory Overhead Rates

The total factory overhead for Urban Styles, Inc. is budgeted for the year at $1,356,250, divided into two departments: Cutting, $1,102,500, and Sewing, $253,750. Urban Styles manufactures two types of men's pants: jeans and khakis. The jeans require three direct labor hours in Cutting and three direct labor hours in Sewing. The khakis require four direct labor hours in Cutting and two direct labor hours in Sewing. Each product is budgeted for 7,000 units of production for the year.

When required, round all per unit answers to the nearest cent.

a. Determine the total number of budgeted direct labor hours for the year in each department.

Cutting direct labor hours
Sewing direct labor hours

b. Determine the departmental factory overhead rates for both departments.

Cutting $ per dlh
Sewing $ per dlh

c. Determine the factory overhead allocated per unit for each product using the department factory overhead allocation rates.

Jeans $ per pair of jeans
Khakis $ per pair of khakis

Solutions

Expert Solution

a) Total number of budgeted direct labor hours= (Direct labour hour required for each product) * (Production per year)

Cutting-

Jeans = (3 hours)* ( 7000 units) = 21000 hours

khakis= (4 hours) * (7000 units) = 28000 hours

Total direct labour hours for cutting = 21000 hours + 28000 hours = 49000 hours

Sewing-

Jeans = 3 hours * 7000 units = 21000 hours

sewing= 2 hours * 7000 units = 14000 hours

Total direct labour hours for sewing = 21000 hours + 14000 hours = 35000 hours

b) Factory overhead rate = Factory overheads / total direct labour hours

Cutting = $1102500 / 49000 hours = $22.5

Sewing = $253750 / 35000 hours = $7.25

.

c) Factory overheads allocated per unit for each product = Direct labour hours * factory overhead rate

Jeans-

Cutting - 3 hours * $22.5 = $ 67.5

Sewing - 3 hours * $7.25 = $ 21.75

Total factory overheads per pair of jeans = $67.5 + $21.75 = $89.25

Khakis-

Cutting - 4 hours * $22.5 = $90

Sewing - 2 hours * $21.75 = $43.5

Total factpry overheads per pair of khadis = $90 + $43.5 = $133.5

keosha answered 2 hours ago
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