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he Sawtooth Leather Company manufactures leather handbags and moccasins. For simplicity, the company has decided to...

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Accounting

he Sawtooth Leather Company manufactures leather handbags andmoccasins. For simplicity, the company has decided to use a singleplantwide factory overhead rate method to allocate factoryoverhead. Handbags = 60,000 units, 2 hours of direct laborMoccasins = 40,000 units, 3 hours of direct labor Total budgetedfactory overhead cost = $360,000 Calculate the amount of factoryoverhead to be allocated to each unit using direct labor hours.Round your answers to two decimal places, if necessary. Handbags: $per unit Moccasins: $ per unit

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Handbags Moccasins
Allocated Budgeted Factory overheads cost $       3.00 $       4.50
per unit per unit
Workings:
Handbags Moccasins Total
(i) Units      60,000      40,000
(ii) Direct labor hours per unit                 2                 3
(i) X (ii) Total Direct labor hours 1,20,000 1,20,000 2,40,000
Pre - determined overhead rate per direct labor hour = Budgeted Factory overheads cost / Total Direct labor hours
= $360000 / 240000 Direct labor hours
= $       1.50 per unit
Handbags Moccasins Total
(i) Direct labor hours per unit                 2                 3
(ii) Pre - determined overhead rate per direct labor hour $       1.50 $       1.50
(i) X (ii) Allocated Budgeted Factory overheads cost $       3.00 $       4.50
per unit per unit

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