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 Cut and Sew Department overhead $124,800 207,000 Total $331,800 The direct labor estimated for each production department was as follows: Pattern Department 2,400 direct labor hours 3,000 Cut and Sew Department Total 5,400 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:

Answer 1

Solution a:
Computation of overhead rate for Each department
Particulars	Pattern Department	Cut and Sew department
Budgeted Overhead costs	$1,24,800	$2,07,000
/Budgeted direct labor Hours	2400	$3,000
Departmental Overhead rate	$52.00	$69.00
Solution b:
Computation of Factory overhead per unit of Each product
	Small Glove	Medium Glove	Large Glove
Pattern Department:
Direct labor hours per unit	0.05	0.06	0.07
*Departmental Overhead rate	$52.00	$52.00	$52.00
Unit Factory Overhead (a)	$2.60	$3.12	$3.64
Cut and Sew Department:
Direct labor hours per unit	0.08	0.10	0.12
*Departmental Overhead rate	$69.00	$69.00	$69.00
Unit Factory Overhead (b)	$5.52	$6.90	$8.28
Factory overhead per unit of Each product (a+b)	8.12	10.02	11.92