The Anazi Leather Company manufactures leather handbags and moccasins. The company has been using the factory overhead rate method but has decided to evaluate the multiple production department factory overhead rate to allocate factory overhead. The factory overhead estimated per unit together with direct materials and direct labor will help determine selling prices. Handbags = 60,000 units, 3 hours of direct labor Moccasins = 40,000 units, 2 hours of direct labor Total Budgeted factory overhead cost = $360,000 The company has two different production departments: Cutting and Sewing. The cutting department has a factory overhead budget of $80,000. Each unit will require 1 direct labor hour or a total of 100,000 direct labor hours. The Sewing Department estimates factory overhead in the amount of $280,000. Handbags require 2 hours of sewing time and Moccasins require 1 hour for a total of 160,000 labor hours. Calculate the total factory overhead to be allocated to each product using direct labor hours. Round interim calculations to two decimal places, if necessary.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
The Anazi Leather Company manufactures leather handbags and moccasins. The company has been using the factory
Handbags = 60,000 units, 3 hours of direct labor
Moccasins = 40,000 units, 2 hours of direct labor
Total Budgeted
The company has two different production departments: Cutting and Sewing. The cutting department has a factory overhead budget of $80,000. Each unit will require 1 direct labor hour or a total of 100,000 direct labor hours.
The Sewing Department estimates factory overhead in the amount of $280,000. Handbags require 2 hours of sewing time and Moccasins require 1 hour for a total of 160,000 labor hours.
Calculate the total factory overhead to be allocated to each product using direct labor hours. Round interim calculations to two decimal places, if necessary.
| Moccasins | $___________________ |
| Handbags | $___________________ |
| Total Factory Overhead Allocation | $___________________ |
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