Question

Single Plantwide Factory Overhead Rate

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 $352,800.

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			360			950
Skim milk			390			860
Cream			310			350
			1,060			2,160
Packing Department
Whole milk			480			550
Skim milk			760			680
Cream			220			210
			1,460			1,440
	Total		2,520			3,600

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	$ per direct labor hour
b. Machine hour overhead rate	$ 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	$	$	$
Machine hours	$	$	$

Answer 1

Answer 1

a. Direct labor overhead rate	$ 140	per direct labor hour
b. Machine hour overhead rate	$   98	per machine hour

Calculations:

a. Direct labor overhead rate	=352800/2520	per direct labor hour
b. Machine hour overhead rate	=352800/3600	per machine hour

Answer 2

	Whole Milk	Skim Milk	Cream
Direct labor hours	$   117,600	$ 161,000	$ 74,200
Machine hours	$   147,000	$ 150,920	$ 54,880

Calculations:

	Whole Milk	Skim Milk	Cream
Direct labor hours	=140*(360+480)	=140*(390+760)	=140*(310+220)
Machine hours	=98*(950+550)	=98*(860+680)	=98*(350+210)

In case of any doubt or clarification, you're welcome to come back via comments.