Handy Leather, Inc., produces three sizes of sports gloves: small, medium, and large. A glove pattern is first stenciled onto leather in the Pattern Department. The stenciled patterns are then sent to the Cut and Sew Department, where the glove is cut and sewed together. Handy Leather uses the multiple production department factory overhead rate method of allocating factory overhead costs. Its factory overhead costs were budgeted as follows: Pattern Department overhead $162,500 Cut and Sew Department overhead 266,600 Total $429,100 The direct labor estimated for each production department was as follows: Pattern Department 2,500 direct labor hours Cut and Sew Department 3,100 Total 5,600 direct labor hours Direct labor hours are used to allocate the production department overhead to the products. The direct labor hours per unit for each product for each production department were obtained from the engineering records as follows: Production Departments Small Glove Medium Glove Large Glove Pattern Department 0.04 0.05 0.06 Cut and Sew Department 0.08 0.10 0.12 Direct labor hours per unit 0.12 0.15 0.18 If required, round all per unit answers to the nearest cent. a. Determine the two production department factory overhead rates.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Handy Leather, Inc., produces three sizes of sports gloves: small, medium, and large. A glove pattern is first stenciled onto leather in the Pattern Department. The stenciled patterns are then sent to the Cut and Sew Department, where the glove is cut and sewed together. Handy Leather uses the multiple production department factory
| Pattern Department overhead | $162,500 | ||
| Cut and Sew Department overhead | 266,600 | ||
| Total | $429,100 |
The direct labor estimated for each production department was as follows:
| Pattern Department | 2,500 | direct labor hours | |
| Cut and Sew Department | 3,100 | ||
| Total | 5,600 | direct labor hours |
Direct labor hours are used to allocate the production department overhead to the products. The direct labor hours per unit for each product for each production department were obtained from the engineering records as follows:
| Production Departments | Small Glove | Medium Glove | Large Glove | |||
| Pattern Department | 0.04 | 0.05 | 0.06 | |||
| Cut and Sew Department | 0.08 | 0.10 | 0.12 | |||
| Direct labor hours per unit | 0.12 | 0.15 | 0.18 |
If required, round all per unit answers to the nearest cent.
a. Determine the two production department factory overhead rates.
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