Question

Single Plantwide Factory Overhead Rate Spotted Cow Dairy Company manufactures three products—whole milk, skim milk, and...

Single Plantwide Factory Overhead Rate

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 $241,500.

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 220 620
Skim milk 240 560
Cream 200 220
660 1,400
Packing Department
Whole milk 310 340
Skim milk 490 420
Cream 150 140
950 900
Total 1,610 2,300

Required:

1. Determine the single plantwide factory overhead rate, using each of the following allocation bases: (a) direct labor hours and (b) machine hours. If required, round all amounts to the nearest dollar.

a. Direct labor overhead rate $ per direct labor hour
b. Machine hour overhead rate $ per machine hour

2. Determine the product factory overhead costs, using (a) the direct labor hour plantwide factory overhead rate and (b) the machine hour plantwide factory overhead rate.

Whole Milk Skim Milk Cream
Direct labor hours $ $ $
Machine hours $ $ $
  1. 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 $496,400.

    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 610 830
    Skim milk 390 670
    Cream 300 530
    1,300 2,030
    Packing Department
    Whole milk 180 1,280
    Skim milk 190 780
    Cream 175 840
    545 2,900
    Total 1,845 4,930

    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 $247,000
    Packing Department 249,400
    Total $496,400

    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 $ $ $
  1. Allocating Selling and Administrative Expenses using Activity-Based Costing

    Shrute Inc. manufactures office copiers, which are sold to retailers. The price and cost of goods sold for each copier are as follows:

    Price $720 per unit
    Cost of goods sold 430
    Gross profit $290 per unit

    In addition, the company incurs selling and administrative expenses of $279,440. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related to its three major nonmanufacturing activities: customer service, sales order processing, and advertising support. The advertising support is in the form of advertisements that are placed by Shrute Inc. to support the retailer's sale of Shrute copiers to consumers. The budgeted activity costs and activity bases associated with these activities are:

    Activity Budgeted Activity Cost Activity Base
    Customer service $35,760 Number of service requests
    Sales order processing 22,680 Number of sales orders
    Advertising support 221,000 Number of ads placed
    Total activity cost $279,440

    Activity-base usage and unit volume information for the three customers is as follows:

    The Warehouse Kosmo Co. Supply Universe Total
    Number of service requests 50 10 180 240
    Number of sales orders 240 100 500 840
    Number of ads placed 20 20 130 170
    Unit volume 640 640 640 1,920

    Required:

    1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar.

    Activity Rate
    Customer Service $ per serv. req.
    Sales Order Processing $ per bid
    Advertising Support $ per customer design change

    2. Determine the activity costs allocated to the three customers, using the activity rates in (1).

    Activity Costs
    The Warehouse $
    Kosmo Co. $
    Supply Universe $

    3. Construct customer profitability reports for the three customers, dated for the year ended December 31, 2016, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Enter all amounts as positive numbers, except for a negative income from operations.

    Shrute Inc.
    Customer Profitability Report
    For the Year Ended December 31
    The Warehouse Kosmo Co. Supply Universe
    Revenues $ $ $
    Cost of goods sold
    Gross profit $ $ $
    Selling and administrative activities:
    Customer service $ $ $
    Sales order processing
    Advertising support
    Total selling and administrative activities $
    Income (loss) from operations $ $ $
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Answer #1

Solution:

Problem 1 --

Part 1(a) – Calculation of Single Plantwide Factory Overhead Rate using allocation base Direct labor hours

Total Factory Overhead Costs (A)

$241,500

Total Direct labor hours (Blending + Packing Department) (B)

1610

Hours

Direct Labor Overhead Rate (A / B)

$150

Per direct labor hour

Part 1(b) – Calculation of Single Plantwide Factory Overhead Rate using allocation base Machine hours

Total Factory Overhead Costs (A)

$241,500

Total Machine Hours (Blending + Packing Department) (B)

2300

hours

Machine Hour Overhead Rate (A / B)

$105

per machine hour

Part 2(a) – Product factory overhead cost using direct labor hour plantwide factory overhead rate

Whole Milk

Skim Milk

Cream

Direct Labor Hours Used

- In Blending Department

220

240

200

- In Packing Department

310

490

150

Total Direct Labor Hours Used (A)

530

730

350

Direct Labor Overhead Rate (Refer Part 1(a) (B)

$150

$150

$150

Product factory Overhead Costs (A * B)

$79,500

$109,500

$52,500

Part 2(b) – Product factory overhead cost using machine hour plantwide factory overhead rate

Whole Milk

Skim Milk

Cream

Machine Hours Used

- In Blending Department

620

560

220

- In Packing Department

340

420

140

Total Machine Hours Used (A)

960

980

360

Machine Overhead Rate (Refer Part 1(b) (B)

$105

$105

$105

Product factory Overhead Costs (A * B)

$100,800

$102,900

$37,800

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts

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