Question 2

Custom Clothing Ltd is a manufacturer of pieces of clothing ordered by customers in their own design. The minimum number of pieces to accept an order is 80 pieces. The following information for the year 2019 is provided by this company:

Total production and sales (number of pieces)	80,000 pieces
Total direct labour hours	100,000
Total machine hours	60,000
Costs:
Marketing	$2,400,000
Machine and maintenance repairs	$860,000
Depreciation of sewing machines	$32,000
Depreciation of factory building	$18,000
Depreciation of administration equipment	$8,000
Total cost of direct materials	$720,000
Cleaning materials factory	$6,000
Interest	$2,100
Total cost of direct labour	$1,800,000
Indirect labour	$1,400,000
Factory electricity	$650,000
Administration	$1,800,000
Other indirect costs	$520,000

1. Identification of costs

From the information provided, calculate the following costs:

Total direct costs
Total overhead costs
Total manufacturing costs

2. Calculation of OH rates

Calculate the total overhead rates (round to 2 decimal places) using:

1. Direct labour hours as the cost driver
2. Number of pieces produced as the cost driver

Rate based on direct labour hours	Rate based on number of pieces produced