Question

Multiple production department factory overhead rates

The management of Spotted Cow Dairy Company, described in Problem 26-1B, now plans to use the multiple production department factory overhead rate method. The total factory overhead associated with each department is as follows:

Instructions

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

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2. Determine the product factory overhead costs, using the multiple production department rates in (1).

Answer 1

Multiple production department factory overhead rate

1.

The allocation base for Blending Department is machine hours. The department costs are $178,200. Hence,

per machine hour

The allocation base for Packing Department is direct labor hours. The department costs are $121,500.

Hence,

per direct labor hour.

2)

Product-wise allocated factory overhead

We need to use machine hour rate for blending department and direct labor hour rate for packing department for each product category.

The computation is shown in the table below:

Whole Milk:
Blending Department	650 mh	x $110/mh	$71,500
Packing Department	470 dlh	x $135/dlh	63,450
Total factory overhead			$134,950
Skim Milk:
Blending Department	710 mh	x $110/mh	$78,100
Packing Department	300 dlh	x $135/dlh	40,500
Total factory overhead			$118,600
Cream:
Blending Department	260 mh	x $110/mh	$28,600
Packing Department	130 dlh	x $135/dlh	17,550
Total factory overhead			$46,150