Question

Last year, Run the Run Corporation (RTR) launched their new woman's footwear line, called Happy Feet. Happy Feet became a huge success that year. The company is considering manufacturing both men's and a children's version of this particular line. RTR uses activity-based costing to determine its product costs. In RTR's case, the three activities required to manufacture footwear are separated into three departments (cutting, machining and finishing). The following table outlines the budgeted manufacturing overhead costs and the estimated direct labor hours for each production department for this year:

	Budgeted Manufacturing Overhead Costs	Estimated Direct Labor Hours
Cutting Department Overhead	$129,000	8,600
Machining Department Overhead	$180,630	8,100
Finishing Department Overhead	$127,070	9,700
Total	$436,700	26,400

The company uses direct labor hours to allocate production department overhead to the products. The following table identifies the direct labor hours required to make one unit (pair) for each product for each production department.

	Cutting Department	Machining Department	Finishing Department
Women	0.60	0.50	0.50
Men	0.30	0.10	0.40
Children	0.40	0.10	0.30

Do not enter dollar signs or commas in the input boxes.
Round all answers to 2 decimal places.

a) Determine the budgeted overhead rates for each department.

Cutting Department Overhead: Answer per hour
Machining Department Overhead: Answer per hour
Finishing Department Overhead: Answer per hour
b) Determine the manufacturing overhead per unit for each product.

Women: Answer per pair
Men: Answer per pair
Children: Answer per pair

Answer 1

Solution :

(a) Overhead Rate for Each Department :

Department	Overhead	Direct Labor Hours	Overhead Rate
Cutting	$ 129,000	8,600	$ 15 per Hour
Machining	$ 180,630	8,100	$ 22.30 per Hour
Finishing	$ 127,070	9,700	$ 13.10 per Hour

(b) Manufacturing OH per Unit :

Product	Working	Amount
Women	(0.60 * $ 15) + (0.50 * $ 22.30) + (0.50 * $ 13.10)	$ 26.70
Men	(0.30 * $ 15) + (0.10 * $ 22.30) + (0.40 * $ 13.10)	$ 11.97
Children	(0.40 * $ 15) + (0.10 * $ 22.30) + (0.30 * $ 13.10)	$ 12.16

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answered by: anonymous