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Anazi Leather Company manufactures leather handbags and moccasins. The company has been using the single plantwide...

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General Management

Anazi Leather Company manufactures leather handbags andmoccasins. The company has been using the single plantwide factoryoverhead rate method but has decided to evaluate the multipleproduction department factory overhead rate method to allocatefactory overhead.  The factory overhead estimated perunit together with direct materials and direct labor will helpdetermine selling prices.

?Handbags = 60,000 units, 3 hours of directlabor

Moccasins= 40,000 units, 2 hours of directlabor

Total budgeted factory overhead cost =$360,000

The company has two different production departments:Cutting and Sewing. The Cutting Department has a factory overheadbudget of $80,000.  Each unit will require 1 direct laborhour or a total of 100,000 direct labor hours.

?The Sewing Department estimates factory overhead in theamount of $280,000. Handbags require 2 hours of sewing time, andMoccasins require 1 hour for a total of 160,000 direct laborhours.

Using the multiple production department factoryoverhead rate method, compute the total factory overhead to beallocated to each product using direct labor hours as theallocation base.

Answer & Explanation Solved by verified expert
4.5 Ratings (777 Votes)
Answer Given data Handbags 60000 units direct labor 3 hrs Moccasins 40000 units direct labor 2 hrs Total Budgeted factory overhead cost 360000 There are two departments cutting and sewing    See Answer
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