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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:

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

 

a. Calculate production department factory overhead rate for each department:
Total Factory Overhead ÷ Direct Labor Hours = Production Department Factory Overhead Rate

b. Calculate factory overhead per unit for each product:
Production Department Factory Overhead Rate x Direct Labor Hours per Product = Factory Overhead; Add the costs for both departments to obtain the overhead for each product unit.

 

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