Answer:
1. Wee have:
Blending department overhead rate = $110 per machine hour
Packing department overhead rate = $135 per direct labor hour
2. We have:
Whole Milk Total factory overhead = $134,950
Skim Milk Total factory overhead = $118,600
Cream Total factory overhead = $46,150
Explanation:
Note: This question is not complete and the data in it are merged together. The complete question with the sorted data are therefore presented before answering the question as follows:
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:
<u>Direct Labor Hours Machine Hours</u>
<u>Blending Department</u><u> </u>
Whole milk 260 650
Skim milk 245 710
Cream <u> 215 </u> <u> 260 </u>
<u> 720 </u> <u> 1,620 </u>
<u>Packing Department </u>
Whole milk 470 500
Skim milk 300 415
Cream <u> 130 </u> <u> 165 </u>
<u> 900 </u> <u> 1,080 </u>
Total <u> 1,620 </u> <u> 2,700 </u>
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 <u> 121,500 </u>
Total <u> $299,700 </u>
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.
2. Determine the product factory overhead costs, using the multiple production department rates in (1).
The explanation of the answer is now given as follows:
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 overhead rate = Blending department overheads / Blending department machine hours = $178,200 / 1,620 = $110 per machine hour
Packing department overhead rate = Packing department overheads / Packing department labor hours = $121,500 / 900 = $135 per direct labor hour
2. Determine the product factory overhead costs, using the multiple production department rates in (1).
Note: See the attached excel file for the determination of the product factory overhead costs, using the multiple production department rates.
In the attached excel file the following formulae are used to calculate the product factory overhead costs:
Blending department factory overhead = Machine fours * Overhead rate per machine hour
Packing department factory overhead = Direct labor hours * Overhead rate per direct labor hour
From the attached excel file, we have:
Whole Milk Total factory overhead = $134,950
Skim Milk Total factory overhead = $118,600
Cream Total factory overhead = $46,150
