Single Plantwide Factory Overhead Rate Spotted Cow Dairy Company manufactures th

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 $299,700.

Required:

1. Determine the single plantwide factory overhead rate, using each of the following allocation bases: (a) direct labor hours and (b) machine hours.

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.

Direct labor hour overhead rate $ per direct labor hour Machine hour overhead rate $ per machine hour

Explanation / Answer

(1) Single plant-wide

Direct labor hour overhead rate = $299,700 / 1,620 = $185 per hour

machine hour overhead rate = $299,700 / 2,700 = $111 per hour

(2) Factory-wide overhead cost

(i) Whole Milk:

Direct labor hour overhead cost = $299,700 x (260 + 470) / 1,620 = $135,050

Machine hours overhead cost = $299,700 x (650 + 500) / 2,700 = $127,650

(ii) Skim milk

Direct labor hour overhead cost = $299,700 x (245 + 300) / 1,620 = $100,825

Machine hours overhead cost = $299,700 x (710 + 415) / 2,700 = $124,875

(iii) Cream

Direct labor hour overhead cost = $299,700 x (215 + 130) / 1,620 = $63,825

Machine hours overhead cost = $299,700 x (260 + 165) / 2,700 = $47,175

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