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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 $528,400.

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 850 1,150
Skim milk 540 930
Cream 410 730
1,800 2,810
Packing Department
Whole milk 250 1,670
Skim milk 260 1,030
Cream 245 1,100
755 3,800
Total 2,555 6,610

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 $270,000
Packing Department 258,400
Total $528,400

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 $ $ $
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Answer #1
Req 1:
STATEMENT SHOWING OH RATE OF EACH DEPARTMENT
MEASURES Total Expected OH
DEPARTMENT Overheads Activity Rate
BLENDING DLH 270,000 1,800 150 PER DLH
PACKING MH 258,400 3,800 68 PER MH
OH rate:
Blending $150 per DLH
Packing $ 68 per MH
Req 2:
WHOLE MILK SKIM MILK CREAM
DLH of Blendidng 850 540 410
MH of Packing 1670 1030 1100
OH assigned:
Blending deptt @$150 per DLH 127500 81000 61500
Packing deptt @$68 per MH 113560 70040 74800
Total OH assigned 241060 151040 136300
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