BALAT LEATHER WORKS, WHICH MANUFACTURES SADDLES AND OTHER LEATHER G...

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