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 $282,100.

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			330			780
Skim milk			360			710
Cream			290			280
			980			1,770
Packing Department
Whole milk			390			510
Skim milk			620			630
Cream			180			190
			1,190			1,330
	Total		2,170			3,100

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

1.

Total factory overheads= $282,100
Total direct labour hours = 2,170 hours
Total Machine hours= 3,100 hours

(a) Direct labour overhead rate = Total factory overheads/Total direct labour hours
=$282,100/2,170 hours = $130/hour

(b)Machine hour overhead rate = Total factory overheads/Total Machine hours
= $282,100/3,100 hours= $91/hour

2

(a) direct labour hour plantwide factory overhead rate

Whole milk= (330+390) hours * $130/hour = $93,600
Skim Milk= (360+620) hours * $130/hour = $127,400
Cream= (290+180) hours * $130/hour = $61,100

(b) machine hour plantwide factory overhead rate

Whole milk= (780+510) hours * $91/hour = $117,390
Skim Milk= (710+630) hours * $91/hour = $121,940
Cream= (280+190) hours * $91/hour = $42,770