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 $428,900.

The three products consume both machine hours and direct labor hours in the two production departments as follows:

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 $428,900. 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 610 390 300 1,300 830 670 530 2,030 Packing Department Whole milk Skim milk Cream 180 190 175 545 1,845 1,190 730 780 2,700 4,730 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 $221,000 207,900 $428,900 Total

Answer 1

1.

Blending department overhead rate = Blending department overheads/Blending department direct labor hours

= 221,000/1,300

= $170 per direct labor hour

Packing department overhead rate = Packing department overheads/Packing department machine hours

= 207,900/2,700

= $77 per machine hour

2.

	Whole milk	Skim milk	Cream
Blending department factory overhead = Direct labor hours x Overhead rate per direct labor hour	610 x 170 = $103,700	390 x 170 = $66,300	300 x 170 = $51,000
Packing department factory overhead = Machine fours x Overhead rate per machine hour	1,190 x 77 = $91,630	730 x 77 = $56,210	780 x 77 = $ 60,060
Total factory overheads	$195,330	$122,510	$111,060

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