Question

The Sawtooth Leather Company manufactures leather handbags and moccasins. For simplicity, the company has decided to use a single plantwide factory overhead rate method to allocate factory overhead. Handbags = 60,000 units, 2 hours of direct labor Moccasins = 40,000 units, 3 hours of direct labor Total budgeted factory overhead cost = $360,000 Calculate the amount of factory overhead to be allocated to each unit using direct labor hours. Round your answers to two decimal places, if

Answer 1

Answer:

$3; $4.5

Explanation:

Total direct labor hour:

= Handbags + Moccasins

= (60,000 × 2) + (40,000 × 3)

= 120,000 + 120,000

= 240,000 direct labor hours

Total Overheads = $360,000

Overhead rate per direct labor hour:

= Total Overheads ÷ Direct labor hour

= $360,000 ÷ 240,000

= $1.5

Total OH cost per unit for handbags:

= OH rate per DLH × DLH per unit

= $1.5 × 2

= $3

Total OH cost per unit for Moccasins:

= OH rate per DLH × DLH per unit

= $1.5 × 3

= $4.5