Multiple Production Department Factory Overhead Rates Spotted Cow Dairy Company
ID: 2547130 • 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 $332,000.
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 560 770 Skim milk 360 620 Cream 280 480 1,200 1,870 Packing Department Whole milk 170 1,100 Skim milk 180 680 Cream 155 720 505 2,500 Total 1,705 4,370Explanation / Answer
1) Blending Department 192,000/1,200= 160 per direct labor hr Packing department 140,000/2500= 56 per machine hour whole Skim Cream 2) milk milk Blending department fOH@160 *(560;360;280) 89600 57600 44800 packing deptt FOH @$56 *(1,100;680;720) 61600 38080 40320
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