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.
