Hello, I was hoping to receive some help on a problem I have. From Chapter 18: A

Question

Hello, I was hoping to receive some help on a problem I have. From Chapter 18: Activity Based Costing, may someone help me answer 1 and 2? Any help is appreciated, thank you!

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 $506,600 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 Skim milk Cream 800 510 390 1,700 1,090 870 690 2,650 Packing Department Whole milk Skim milk Cream 240 250 225 715 2,415 1,630 1,000 1,070 3,700 6,350 Total 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 Packing Department $255,000 251,600 $506,600 Total

Explanation / Answer

1.

working note:

blending department = $255,000 / 17,000 labour hours

=>$150.00

Packing department=$251,600 / 3700 machine hours

=>$68.00.

2.

working:

blending department :

whole milk = 800 direct labour hours * $150per direct labour hour

=>$120,000.

skim milk = 510 labour hours * $150 per direct labour hour

=>$76,500.

cream = 390 labour hours *$15 per direct labour hour

=>$58,500.

Packing department factory overhead :

whole milk = 1,630 machine hours * $68 per machine hour

=>$110,840.

skim milk = 1,000 machine hours * $68 per machine hour

=>$68,000

cream =1,070 machine hours * $68 per machine hour

=>$72,760

Blending department $150.00 per direct labour hour Packing department $68.00 per machine hour

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