Multiple Production Department Factory Overhead Rates Spotted Cow Dairy Company
ID: 2406124 • Letter: M
Question
Multiple Production Department Factory Overhead Rates
Spotted Cow Dairy Company manufactures three products—whole milk, skim milk, and cream—in two production departments, Blending and Packing. The factory overhead for Spotted Cow Dairy is $391,300.
The three products consume both machine hours and direct labor hours in the two production departments as follows:
The management of Spotted Cow Dairy Company now plans to use the multiple production department factory overhead rate method. The total factory overhead associated with each department is as follows:
Required:
If required, round all amounts to the nearest dollar.
1. Determine the multiple production department factory overhead rates, using direct labor hours for the Blending Department and machine hours for the Packing Department.
2. Determine the product factory overhead costs, using the multiple production department rates in (1).
Feedback
1. Calculate for each department:
Total department overhead ÷ total activity base = Department rate
2. Calculate for each product:
Activity base-usage x Activity Rate from Req. (1) = Activity cost for each activity.
Then sum all activity costs per product to determine a total overhead for each product.
Learning Objective 3.
Direct Labor Hours Machine Hours Blending Department Whole milk 660 890 Skim milk 420 720 Cream 320 570 1,400 2,180 Packing Department Whole milk 190 1,360 Skim milk 210 840 Cream 190 900 590 3,100 Total 1,990 5,280Explanation / Answer
1 Blending Department 140 =196000/1400 Packing Department 63 =195300/3100 2 Whole milk Skim milk Cream Blending Department factory overhead 92400 58800 44800 Packing Department factory overhead 85680 52920 56700 Total factory overhead 178080 111720 101500
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