3. Ben & Jerry\'s Creamery factory has developed the following table that lists
ID: 2515711 • Letter: 3
Question
3. Ben & Jerry's Creamery factory has developed the following table that lists the indirect cost rates and bases for five production departments: a. Compute the total factory cost for a month. b. Determine the allocation variance relative to a total indirect cost allocation budget of $380,000 Department Allocation 2 4 *DLH-direct labor hours, MH- machine hours, DLC-direct labor cost Basis* ?? DLC DLH MH DLC Rate, $ 0.75 2.07 1.67 5.13 3.15 Direct LaborDirect Labor Hours 6,000 12,000 18,000 8,130 11,200 Cost, $ 25,000 23,000 15,000 14,000 30,000 Machine Hours 32,000 13,000 7,000 44,000 9,000Explanation / Answer
Ben & Jerry’s Creamery
3a. Compute the total factory cost for a month:
Department
Direct Labor Cost
Overhead cost
1
$25,000
$24,000
2
$23,000
$47,610
3
$15,000
$30,060
4
$14,000
$225,720
5
$30,000
$94,500
Total cost
$107,000
$421,890
Total factory cost = direct labor cost + indirect cost
total factory cost = $107,000 + $421,890 = $528,890
Notes:
The allocation of indirect cost to the five departments is as follows,
Department
Basis
Rate
Allocated Indirect Cost
1
MH
$0.75
32,000 MH
$24,000
2
DLC
$2.07
$23,000
$47,610
3
DLH
$1.67
18,000 DLH
$30,060
4
MH
$5.13
44,000 MH
$225,720
5
DLC
$3.15
$30,000
$94,500
$421,890
3b. Determination of allocation variance relative to a total indirect cost allocation budget of $380,000:
Allocation budget = $380,000
Actual indirect cost = $421,890
Allocation variance = $41,890 Unfavorable
Department
Direct Labor Cost
Overhead cost
1
$25,000
$24,000
2
$23,000
$47,610
3
$15,000
$30,060
4
$14,000
$225,720
5
$30,000
$94,500
Total cost
$107,000
$421,890
Total factory cost = direct labor cost + indirect cost
total factory cost = $107,000 + $421,890 = $528,890
Notes:
The allocation of indirect cost to the five departments is as follows,
Department
Basis
Rate
Allocated Indirect Cost
1
MH
$0.75
32,000 MH
$24,000
2
DLC
$2.07
$23,000
$47,610
3
DLH
$1.67
18,000 DLH
$30,060
4
MH
$5.13
44,000 MH
$225,720
5
DLC
$3.15
$30,000
$94,500
$421,890
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