Multiple Production Department Factory Overhead Rates Spotted Cow Dairy Company

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 $327,400.

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).

Direct Labor Hours Machine Hours Blending Department Whole milk 800 1,090 Skim milk 510 870 Cream 390 690 1,700 2,650 Packing Department Whole milk 240 1,580 Skim milk 250 970 Cream 225 1,050 715 3,600 Total 2,415 6,250

Explanation / Answer

1.

2.

Blending department 110 (187,000/1,700) Packing department 39 (140,400/3,600)

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