Spotted Cow Dairy Company manufactures three products whole milk, skim milk, and

Question

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 $579,000 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 Skim milk Cream 750 480 370 1,600 1,030 830 540 2,500 Packing Department Whole milk Skim milk Cream 220 230 220 670 2,270 1,630 1,000 1,070 3,700 6,200 Total 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 Packing Department $320,000 259,000 $579,000 Total 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. Blendina Department per direct labor hour

Explanation / Answer

1) Calculation of factory overhead rate: Blending department on the basis of direct labor hours: Overhead rate= Total overhead cost of blending department/ direct labor hours                             = 320000/1600=$200 Overhead rate of blending department is $200 per direct labor hour Packing department on the basis of machine hours: Overhead rate= Total overhead cost of packing department/ machine hours                             = 259000/3700=$70 Overhead rate of packing department is $70 per machine hour 2) calculation of product factory overhead costs: Whole milk Skim Milk Cream Blending departemnt factory overhead 150000 96000 74000 (Whole milk=200*750, Skim milk= 200*480, Cream=200*370) Packing department factory overhead 114100 70000 74900 (Whole milk=70*1630, Skim milk= 70*1000, Cream=70*1070) Total factory overhead 264100 166000 148900

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.