Question : 106. Ratchford Clocks manufactures alarm clocks and wall clocks and allocates : 1239672

 

106. Ratchford Clocks manufactures alarm clocks and wall clocks and allocates overhead based on direct labor hour. The production process is set up in three departments: assembly, finishing, and calibrating. The following is information regarding the direct labor used to produce one unit of the two clocks: 

Per Unit Hours:

Assembly

Finishing

Calibrating

Alarm clocks

3

1

1

Wall clocks

2

3

2

 

5

4

3

 

 

 

 

The budget includes the following factory overhead by department: 

Assembly Department

$595,000

Finishing Department

200,000

Calibrating Department

  140,000

               Total

$935,000

 

 

Ratchford Clocks is planning to manufacture 50,000 alarm clocks and 10,000 wall clocks. 

(a)

Determine the total number of hours that will be needed by department.

 

 

(b)

Determine the factory overhead rate by department using the multiple production department factory overhead rate method.

 

 

(c)

Determine the amount of factory overhead to be allocated to each unit of alarm clocks and wall clocks.

 

 

(d)

Determine the amount of total factory overhead to be allocated to the alarm clocks and wall clocks.

 

 

 

 

 

 

 

 

107. The Anazi Leather Company manufactures leather handbags (H) and moccasins (M).  The company has been using the factory overhead rate method but has decided to evaluate the multiple production department factory overhead rate to allocate factory overhead.  The factory overhead estimated per unit together with direct materials and direct labor will help determine selling prices. Handbags = 60,000 units, 3 hours of direct laborMoccasins= 40,000 units, 2 hours of direct laborTotal Budgeted factory overhead cost = $360,000The company has two different production departments: Cutting and Sewing.  The cutting department has a factory overhead budget of $80,000.  Each unit will require 1 direct labor hour or a total of 100,000 direct labor hours.The Sewing Departments estimates factory overhead in the amount of  $280,000.  Handbags require 2 hours of sewing time and Moccasins require 1 hour for a total of 160,000 labor hours. Calculate the total factory overhead to be allocated to each product using direct labor hours. 

 

 

 

 

 

108. Tulip Company produces two products, T and U. The indirect labor costs include the following two items: 

Plant supervision

$   700,000

Setup labor (indirect)

     300,000

Total indirect labor

$1,000,000

 

 

The following activity-base usage and unit production information is available for the two products: 

 

Number ofSetups

Direct LaborHours

Units

Product T

200

20,000

900

Product U

200

30,000

1,100

  Total

400

50,000

2,000

 

 

 

 

 

(a)

Determine the single plantwide factory overhead rate, using direct labor hours as the activity base.

 

 

(b)

Determine the factory overhead cost per unit for Products T and U, using the single plantwide factory overhead rate.

 

 

(c)

Determine the activity rate for plant supervision and setup labor, assuming that the activity base for supervision is direct labor hours and the activity base for setup is number of setups.

 

 

(d)

Determine the factory overhead cost per unit for Products T and U, using activity-based costing.

 

 

(e)

Why is the factory overhead cost per unit different for the two products under the two methods?