The company has two departments – Cutting and Sewing. The
company uses the multiple production department factory overhead
rate method using direct labor hours. The budgeted factory
overhead is $900,000 for the Cutting Department and $500,000 for
the Sewing Department. The company plans to make 100,000
shirts and 50,000 pairs of pants. It takes 1 hour to cut and
one hour to sew a shirt. It takes 1 hour to cut and 2 hours
to sew a pair of pants. How many direct labor hours are being
worked in each department? What is the factory overhead rate
per direct labor hour for each department? Is it a
better decision for the company to use the multiple production
department factory overhead rate method rather than the single
plantwide factory overhead rate?