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Question
Lemon Yellow Company produces childrens clothing that requires two processes, cutting and sewing, to complete. The company is concerned about one product, a hooded jacket, which hasnt 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 | $26,000 |
| Direct labor | |
| Cutting Department (200 DLH x $20 per DLH) | $4,000 |
| Sewing Department (2,000 DLH x $22 per DLH) | $44,000 |
| Machine hours | |
| Cutting Department | 160 MH |
| Sewing Department | 1,500 MH |
Lemon Yellows 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 Department | Sewing Department | |
| Direct labor hours | 16,000 DLH | 175,000 DLH |
| Machine hours | 3,200 MH | 30,000 MH |
| Manufacturing overhead costs | $480,000 | $240,000 |
Assume this jacket currently sells for $10. How much profit does the company make per jacket?
Answer
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