Question

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 $574,000.

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			710			960
Skim milk			450			770
Cream			340			610
			1,500			2,340
Packing Department
Whole milk			210			1,540
Skim milk			220			950
Cream			200			1,010
			630			3,500
	Total		2,130			5,840

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	$315,000
Packing Department	259,000
Total	$574,000

Required:

If required, round all amounts to the nearest dollar.

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	$		$		$

Answer 1

	Production department Factory overhead rates
		Blending department	packing department
	Total Factory overhead	315000	259000
	Direct labour hours	1500	630
	departmental overhead rate	$ 210/labour hour	$ 411/labour hour

Product factory overhead cost allocation
Factory Overhead		Whole milk			Skim milk			Cream
	Direct labour hours	overhead rate	Total	Direct labour hours	overhead rate	Total	Direct labour hours	overhead rate	Total
Blending department	710	210/labour hour	149100	450	210/labour hour	94500	340	210/labour hour	71400
Packing Department	210	411/labour hour	86310	220	411/labour hour	90420	200	411/labour hour	82200
TOTAL			235410			184920			153600