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Chapter 18 PR 18-2B

PR.18-02B.ALGO

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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 $530,200.

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			850			1,150
Skim milk			540			930
Cream			410			730
			1,800			2,810
Packing Department
Whole milk			250			1,670
Skim milk			260			1,030
Cream			245			1,100
			755			3,800
	Total		2,555			6,610

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	$306,000
Packing Department	224,200
Total	$530,200

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	$		$		$ it is not this Whole milk Skim milk Cream Blending Department factory overhead 144500 91800 69700 Packing Department factory overhead 98530 60770 64900 Total factory overhead 243030 152570 134600

Answer 1

• All working forms part of the answer
• Requirement 1

	Overhead cost	Allocation base	Amount of allocation base	Allocation rate
Blending Department	$            3,06,000.00	Total direct labor hours	1800 direct labour hours	$               170.00 per direct labor hours
Packing Department	$            2,24,200.00	Total machine hours	3800 machine hours	$                  59.00 per machine hours
Total	$            5,30,200.00

• Requirement 2

Working

		Whole milk	Skim Milk	Cream
A	Total direct labor hours	850	540	410
B	Blending department allocation rate ‘’per direct labor hour’’	$                      170.00	$                     170.00	$                 170.00
C=A x B	Blending Department factory overhead	$            1,44,500.00	$               91,800.00	$           69,700.00
		Whole milk	Skim Milk	Cream
A	Total machine hours	1670	1030	1100
B	Packing department allocation rate ‘’per machine hours’’	$                        59.00	$                       59.00	$                   59.00
C= A x B	Packing department overhead	$                98,530.00	$               60,770.00	$           64,900.00

Answer

	Whole milk	Skim Milk	Cream
Blending Department factory overhead	$            1,44,500.00	$               91,800.00	$           69,700.00
Packing department overhead	$                98,530.00	$               60,770.00	$           64,900.00
Total factory overhead	$            2,43,030.00	$           1,52,570.00	$       1,34,600.00