Multiple Production Department Factory Overhead Rate Method

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		$175,500
Cut and Sew Department overhead		292,400
	Total	$467,900

The direct labor estimated for each production department was as follows:

Pattern Department		2,700	direct labor hours
Cut and Sew Department		3,400
	Total	6,100	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	0.05		0.06		0.07
Cut and Sew Department	0.07		0.09		0.11
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.

Pattern Department	$fill in the blank 1per dlh
Cut and Sew Department	$fill in the blank 2per dlh

b. Use the two production department factory overhead rates to determine the factory overhead per unit for each product.

Small glove	$fill in the blank 3 per unit
Medium glove	$fill in the blank 4 per unit
Large glove	$fill in the blank 5 per unit

1. Product Costs using Activity Rates

   Hercules Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows:

   Activity	Activity Rate
   Fabrication	$30	per machine hour
   Assembly	$17	per direct labor hour
   Setup	$49	per setup
   Inspecting	$26	per inspection
   Production scheduling	$18	per production order
   Purchasing	$15	per purchase order

   The activity-base usage quantities and units produced for each product were as follows:

   Activity Base	Elliptical Machines		Treadmill
   Machine hours	1,818		1,073
   Direct labor hours	477		186
   Setups	57		18
   Inspections	727		436
   Production orders	72		14
   Purchase orders	197		120
   Units produced	296		198

   Use the activity rate and usage information to determine the total activity cost and activity cost per unit for each product. If required, round the per unit answers to the nearest cent.

   	Total Activity Cost	Activity Cost Per Unit
   Elliptical Machines	$fill in the blank 1	$fill in the blank 2
   Treadmill	$fill in the blank 3	$fill in the blank 4