Question

Sportway Inc. produces high-quality tennis racquets and golf clubs using a patented forming process and high-quality hand-finishing. Products move through two production departments: Forming and Finishing. The company uses departmental overhead rates to allocate overhead costs. Overhead is allocated based on machine-hours in Forming and direct labour cost in Finishing. Information related to estimated volumes and denominator values for the coming year are provided below:

	Tennis Racquets			Golf Clubs
Annual production and sales		5,200			8,300
Direct materials per unit	$	4.70		$	3.60
Direct labour cost per unit:
Forming Department	$	10.00		$	4.50
Finishing Department	$	4.50		$	6.00
Machine hours per unit:
Forming Department		0.75			0.25
Finishing Department		0.25			0.50

In addition, the firm budgets manufacturing overhead at $55,000 in the Forming Department and $47,000 in the Finishing Department.

Required:

1.	Determine the overhead application rate for each department. (Round your answers to 2 decimal places.)

  
      

2.	Determine the total cost per unit of tennis racquets and golf clubs. (Round your answers to 2 decimal places.)

  

       

Answer 1

1
Forming	9.21	per MH
Finishing	0.64	per DL $
2
Total cost per unit:
Tennis Racquets	28.99
Golf Clubs	20.24

Workings:
Forming Department Manufacturing overhead	55000
Divide by Machine hours Forming Department	5975	=(5200*0.75)+(8300*0.25)
Overhead application rate	9.21
Finishing Department Manufacturing overhead	47000
Divide by Direct labour cost Finishing Department	73200	=(5200*4.5)+(8300*6)
Overhead application rate	0.64
	Tennis Racquets	Golf Clubs
Direct materials per unit	4.70	3.60
Direct labour cost per unit:
Forming Department	10.00	4.50
Finishing Department	4.50	6.00
Overhead:
Forming Department	6.91	2.30
Finishing Department	2.88	3.84
Total cost per unit	28.99	20.24
	Tennis Racquets	Golf Clubs
Overhead:
Forming Department	=0.75*9.21	=0.25*9.21
Finishing Department	=4.5*0.64	=6*0.64