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Spotted Cow Dairy Company manufactures three products—whole milk, skim milk, and cream—in two production departments, Blending...

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 $226,200.

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			250		740
Skim milk			270		670
Cream			210		270
			730		1,680
Packing Department
Whole milk			330		460
Skim milk			530		570
Cream			150		190
			1,010		1,220
	Total		1,740		2,900

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	$fill in the blank 1 per direct labor hour
b. Machine hour overhead rate	$fill in the blank 2 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	$fill in the blank 3	$fill in the blank 4	$fill in the blank 5
Machine hours	$fill in the blank 6	$fill in the blank 7	$fill in the blank 8

Expert Solution

1. Single plantwide factory overhead rate
a. Direct labor overhead rate [Refer working note 1]	$130	per direct labor hour
b. Machine hour overhead rate [Refer working note 1]	$78	per machine hour

.

2. Product factory overhead cost
	Whole Milk	Skim Milk	Cream
Direct labor hours [Refer working note 2]	$75,400	$104,000	$46,800
Machine hours [Refer working note 3]	$93,600	$96,720	$35,880

.

Working note 1 - Computation of plant-wide overhead rate:
	Direct Labor Hours	Machine Hours
Estimated factory overhead (a)	$226,200	$226,200
Estimated hours (b)	1,740	2,900
Overhead rate (a / b)	$130	$78

.

Working note 2 - Computation of product factory overhead cost using direct labor hour overhead rate

	Whole milk	Skim milk	Cream
Direct labor hours:
Blending Department (a)	250	270	210
Packing Department (b)	330	530	150
Total hours (c= a + b)	580	800	360
Overhead rate based on direct labor hours [Refer working note 1] (d)	$130	$130	$130
Product overhead cost (c x d)	$75,400	$104,000	$46,800

.

Working note 3 - Computation of product factory overhead cost using direct machine hour overhead rate

	Whole milk	Skim milk	Cream
Machine hours:
Blending Department (a)	740	670	270
Packing Department (b)	460	570	190
Total hours (c= a + b)	1,200	1,240	460
Overhead rate based on machine hours [Refer working note 1] (d)	$78	$78	$78
Product overhead cost (c x d)	$93,600	$96,720	$35,880

ekkarill92 answered 1 year ago

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