Country Leatherworks, which manufactures saddles and other leather goods, has three departments. The Assembly Department manufactures various leather products, such as belts, purses and saddlebags, using an 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 labour 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:
The company’s deluxe saddle and accessory set consists of a handmade saddle, two saddlebags, a belt and a vest, all coordinated to match. The entire set uses Ito square metres of leather from the Tanning Department. 4 machine hours in the Assembly Department, and 45 direct labour hours in the Saddle Department.
Estimate the amount of overhead that will be applied a deluxe saddle and accessory set.