6. Balat Leather Works, which manufactures saddles and other leather goods, has three
departments. The Assembly Department manufactures various leather products, such as
belts, purses, and saddle bags, using automated production process. The Saddle
Department produces handmade saddles and uses very little machinery. The Tanning
Department produces leather. The tanning process requires little in the way of labor or
machinery, but it does require space and process time. Due to the different production
processes in the three departments, the company uses three different cost drivers for the
application of manufacturing overhead. The cost drivers and overhead rates are as
follows:
Cost Driver Predetermined Overhead Rate
Tanning Department Square-feet of leather P3 per square-foot
Assembly Department Machine time P9 per machine hour
Saddle Department Direct-labor time P4 per direct labor hour
The company’s deluxe saddle and accessory set consists of handmade saddle, two
saddlebags, a belt, and a vest, all coordinated to match. The entire set uses 100 square-
feet of leather from the Tanning Department, 3 machine hours in the Assembly
Department, and 40 direct-labor hours in the Saddle Department. The company is
processing Job No. 20 consisting of 20 deluxe saddle and accessory sets.
How much is the applied manufacturing overhead in Assembly Department for Job No. 20?
a. P3,200 c. P6,000
b. P 540 d. P3,000
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