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 $299,700.

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			260			650
Skim milk			245			710
Cream			215			260
			720			1,620
Packing Department
Whole milk			470			500
Skim milk			300			415
Cream			130			165
			900			1,080
	Total		1,620			2,700

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	$178,200
Packing Department	121,500
Total	$299,700

Required:

1. Determine the multiple production department factory overhead rates, using machine hours for the Blending Department and direct labor hours for the Packing Department.

Blending Department	$ per machine hour
Packing Department	$ per direct labor 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

Answer -

1.

Blending department	$247.5 per direct labor hour
	($178200/720)
Packing department	$112.5 per machine hour
	($121500/1080)

2.

	Whole milk	Skim milk	Cream
Blending department factory overhead	$64350	$60637.5	$53212.5
	($247.5x 260)	($247.5x 245)	($247.5 x 215)
Packing department factory overhead	$56250	$46687.5	$18562.5
	($112.5 x 500)	($112.5 x 415)	($112.5 x 165)
Total factory overhead	$120,600	$107,325	$71,775

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