Question
Rocky Mountain Leatherworks, which manufactures saddles and other leather goods, has three departments. The Assembly Department manufactures various leather products, such as belts, purses, and
Rocky Mountain Leatherworks, which manufactures saddles and other leather goods, has three departments. The Assembly Department manufactures various leather products, such as belts, purses, and saddlebags, using an automated production process. The Saddle Department produces handmade saddles and uses very little machinery. The Tanning Department produces leather. The tanning process requires little in the way of labor or machinery, but it does require space and process time. Due to the different production processes in the three departments, the company uses three different cost drivers for the application of manufacturing overhead. The cost drivers and overhead rates are as follows: |
Department | Cost Driver | Predetermined Overhead Rate | |
Tanning Department | Square feet of leather | $ | 4 per square foot |
Assembly Department | Machine time | $ | 11 per machine hour |
Saddle Department | Direct-labor time | $ | 5 per direct-labor hour |
The company |
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