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 $443,800.

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			710			960
Skim milk			450			770
Cream			340			610
			1,500			2,340
Packing Department
Whole milk			210			1,410
Skim milk			220			860
Cream			200			930
			630			3,200
	Total		2,130			5,540

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	$255,000
Packing Department	188,800
Total	$443,800

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	$ 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	$		$		$

Answer 1

1)
	Blending Department		(266,000/1,400)			170	per direct labor hour
	Packing Department		(214,400/3,200)			59	per machine hour
						whole	Skim	Cream
2)						milk	milk
	Blending department factory overhead					120700	76500	57800
	Packing department factory overhead					83190	50740	54870
	total factory overhead					203890	127240	112670