Asked by Emily Yannatone on May 02, 2024
Verified
Sawtooth Leather Company manufactures leather handbags and moccasins. Total factory overhead is budgeted for $360,000. For simplicity, the company has decided to use a single plantwide factory overhead rate to allocate factory overhead based on direct labor hours. Handbags are budgeted for 60,000 units. Each handbag requires 2 hours of direct labor. Moccasins are budgeted for 40,000 pairs. Each pair of moccasins requires 3 hours of direct labor. Determine the amount of factory overhead to be allocated per unit(pair) for each product.
Direct Labor Hours
The total time workers or employees spend creating a product or providing a service, often used in cost accounting.
Factory Overhead
Indirect manufacturing costs not directly tied to specific units produced, including maintenance, utilities, and salaries of supervisory staff.
- Compute the rates of factory overhead using both the single plantwide and various production department approaches.
- Comprehend the distribution of factory overhead costs to products through the use of direct labor hours and machine hours as allocation bases.
- Examine the influence of allocating overheads on the precision of product cost determination.
Verified Answer
EA
Ekhlas Al SarmiMay 05, 2024
Final Answer :
Handbags: 60,000 units × 2 direct labor hours = 120,000 direct labor hours
Moccasins: 40,000 pairs × 3 direct labor hours = 120,000 direct labor hours
Total 240,000 direct labor hours
Handbags: 
Moccasins: 
Moccasins: 40,000 pairs × 3 direct labor hours = 120,000 direct labor hours
Total 240,000 direct labor hours
Handbags: Moccasins: 
Learning Objectives
- Compute the rates of factory overhead using both the single plantwide and various production department approaches.
- Comprehend the distribution of factory overhead costs to products through the use of direct labor hours and machine hours as allocation bases.
- Examine the influence of allocating overheads on the precision of product cost determination.