Jurgens Tailoring is a costume company located in Manhattan. Jurgens designs and creates costumes for theatrical presentations. Additionally, Jurgens alters and repairs costumes.

Jurgens has three departments: design, machine sewing, and beading. The design department overhead consists of computers and software for computer-assisted design. The machine¬

sewing department overhead consists of thread, sewing machines, and small tools (e.g., scissors and seam rippers). The beading department has very little overhead, just thread and some glue. Of course, all departments are assigned a share of utilities, rent, and so on.

Information on estimated overhead and direct labor hours for the year by department are as follows:

The Hoboken Ballet has just contracted with Jurgens for twenty new tutus for the Nutcracker Ballet. Hoboken has decided to stick with tried and true patterns, which Jurgens already has in stock, but to splurge on fancier materials and beading. As a result, no Design Department services are needed. Direct materials for the job will cost $6,000. The job will take 160 hours of Sewing Department time at $8 per direct labor hour and 400 hours of Beading Depart¬
ment time at $12.50 per direct labor hour.
Required:
1. Calculate a single overhead rate for Jurgens. What is the total cost of the Hoboken job using this rate?
2. Calculate departmental overhead rates for each department based on direct labor hours.
What is the total cost of the Hoboken job using these rates?
3. Assuming that Jurgens charges customers cost plus 25%, why might it be in Jurgens'
best interests to use a departmental overhead rate?

Transcribed Image Text:

Estimated Overhead Estimated Direct Labor Hours Design Department $55,000 2,000 Sewing Department 42,000 7,000 Beading Department 3,000 1,000