Multiple Production Department Factory Overhead Rates Spotte

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 $391,300.

The three products consume both machine hours and direct labor hours in the two production departments as follows:

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:

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.

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

Feedback

1. Calculate for each department:
Total department overhead ÷ total activity base = Department rate

2. Calculate for each product:
Activity base-usage x Activity Rate from Req. (1) = Activity cost for each activity.
Then sum all activity costs per product to determine a total overhead for each product.

Learning Objective 3.

	Direct Labor Hours	Machine Hours
Blending Department
Whole milk		660			890
Skim milk		420			720
Cream		320			570
		1,400			2,180
Packing Department
Whole milk		190			1,360
Skim milk		210			840
Cream		190			900
		590			3,100
	Total		1,990			5,280

Solution

1 Blending Department 140 =196000/1400 Packing Department 63 =195300/3100 2 Whole milk Skim milk Cream Blending Department factory overhead 92400 58800 44800 Packing Department factory overhead 85680 52920 56700 Total factory overhead 178080 111720 101500