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 $392,200. The three products consume both machine hours and direct labor hours in the two production departments as follows: Direct Labor Hours Machine Hours Blending Department Whole milk 610 830 Skim milk 390 670 Cream 300 530 1,300 2,030 Packing Department Whole milk 180 1,280 Skim milk 190 780 Cream 175 840 545 2,900 Total 1,845 4,930 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: Blending Department $195,000 Packing Department 197,200 Total $392,200 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. Blending Department $ per direct labor hour Packing Department $ 68 per machine hour 2. Determine the product factory overhead costs, using the multiple production department rates in (1). Whole milk Skim milk Cream Blending Department factory overhead $ $ $ Packing Department factory overhead Total factory overhead $ $ $

Explanation / Answer

Req 1: Total DLH for Blending: Whole Milk 610 Skim Milk 390 Cream 300 Total DLH for Blending: 1300 Total MH for Packaging: Whole Milk 1280 Skim Milk 780 Cream 840 Total MH for Packaging: 2900 OH rate for Blending: Estimated OH / Total DLH =195,000 /1300 = $ 150 per DLH OH rate for Packaging: Eestimated OH/ Total MH =197200/2900= $ 68 per MH Req 2: Factory OH Whole Milk Skim Milk Cream DLH of Blending 610 390 300 MH of Packaging 1280 780 840 OH rate for blending 150 150 150 OH rate for Packaging 68 68 68 OH for Blending 91500 58500 45000 Oh for packaging 87040 53040 57120 Ttal OH 178540 111540 102120

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