Chapter 18 PR 18-2B PR.18-02B.ALGO Hide or show questions Progress:1/1 items eBo
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Chapter 18 PR 18-2B
PR.18-02B.ALGO
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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 $530,200.
The three products consume both machine hours and direct labor hours in the two production departments as follows:
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:
Required:
If required, round all amounts to the nearest dollar.
1. Determine the multiple production department factory overhead rates, using direct labor hours for the Blending Department and machine hours for the Packing Department.
2. Determine the product factory overhead costs, using the multiple production department rates in (1).
$
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Direct Labor Hours Machine Hours Blending Department Whole milk 850 1,150 Skim milk 540 930 Cream 410 730 1,800 2,810 Packing Department Whole milk 250 1,670 Skim milk 260 1,030 Cream 245 1,100 755 3,800 Total 2,555 6,610Explanation / Answer
Answer
Overhead cost
Allocation base
Amount of allocation base
Allocation rate
Blending Department
$ 3,06,000.00
Total direct labor hours
1800 direct labour hours
$ 170.00 per direct labor hours
Packing Department
$ 2,24,200.00
Total machine hours
3800 machine hours
$ 59.00 per machine hours
Total
$ 5,30,200.00
Working
Whole milk
Skim Milk
Cream
A
Total direct labor hours
850
540
410
B
Blending department allocation rate ‘’per direct labor hour’’
$ 170.00
$ 170.00
$ 170.00
C=A x B
Blending Department factory overhead
$ 1,44,500.00
$ 91,800.00
$ 69,700.00
Whole milk
Skim Milk
Cream
A
Total machine hours
1670
1030
1100
B
Packing department allocation rate ‘’per machine hours’’
$ 59.00
$ 59.00
$ 59.00
C= A x B
Packing department overhead
$ 98,530.00
$ 60,770.00
$ 64,900.00
Answer
Whole milk
Skim Milk
Cream
Blending Department factory overhead
$ 1,44,500.00
$ 91,800.00
$ 69,700.00
Packing department overhead
$ 98,530.00
$ 60,770.00
$ 64,900.00
Total factory overhead
$ 2,43,030.00
$ 1,52,570.00
$ 1,34,600.00
Overhead cost
Allocation base
Amount of allocation base
Allocation rate
Blending Department
$ 3,06,000.00
Total direct labor hours
1800 direct labour hours
$ 170.00 per direct labor hours
Packing Department
$ 2,24,200.00
Total machine hours
3800 machine hours
$ 59.00 per machine hours
Total
$ 5,30,200.00
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