Calculate the amount of factory overhead

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Question - The Pikes Peak 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 activity based costing to allocate factory overhead. The factory overhead estimated per unit together with direct materials and direct labor will help determine selling prices.

Total Budgetted factory overhead cost = $440,000.

Products

Cutting Direct Labor Hours

Sewing Direct Labor Hours

Set-Ups

QC Inspections

Purchase Orders

Handbags

60,000

60,000

500

200

100

Moccasins

40,000

80,000

300

800

300

Total

100,000

140,000

800

1,000

400

Budget

$80,000

$240,000

$90,000

$20,000

$10,000

Calculate the amount of factory overhead to be allocated to each unit using activity based costing. The factory plans to produce 60,000 handbags, and 40,000 moccasins. Calculate each activity percentage for two products and apply that to the budgeted cost/activity.

Reference no: EM132424243

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