Lemon Yellow Company produces children's clothing that requires two processes, cutting and sewing, to complete. The company is concerned about one product, a hooded jacket, which hasn't been selling as well as it had in past years. Information related to the 20,000 jackets produced annually is shown in the following table:Direct materials$26,000Direct labor? Cutting Department (200 DLH x $20 per DLH)$4,000 Sewing Department (2,000 DLH x $22 per DLH)$44,000Machine hours? Cutting Department160 MH Sewing Department 1,500 MHLemon Yellow's total expected overhead costs and related overhead data are shown below. The company uses departmental overhead rates based on direct labor hours in the Cutting Department and machine hours in the Sewing Department.?Cutting
DepartmentSewingDepartmentDirect labor hours16,000 DLH175,000 DLHMachine hours3,200 MH30,000 MHManufacturing overhead costs $480,000$240,000Assume this jacket currently sells for $10. How much profit does the company make per jacket?
What will be an ideal response?
Cutting Dept. overhead: $480,000/16,000 DLH = $30 per DLH
$30 per DLH x 200 DLH = $6,000 for the hooded jacket product line
Sewing Dept. overhead: $240,000/30,000 MH = $8 per MH
$8 per MH x 1,500 MH = $12,000 for the hooded jacket product line
| ? | Total Product Line 20,000 units | Per Unit |
| Direct materials | $26,000 | $26,000/20,000 units = $1.30 per unit |
| Direct labor | $4,000 + $44,000 = $48,000 | $48,000/20,000 units = $2.40 per unit |
| Overhead | $6,000 + $12,000 = $18,000 | $18,000/20,000 units = $0.90 per unit |
| Total | $92,000 | $4.60 per unit |
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