Spruce Dairy Company manufactures three products - skim milk, whole milk, and cream - in two production departments, Blending and Packing. The factory overhead for Spruce Dairy is $270,000. The three products consume both machine hours and direct labor hours in the two production departments as given:
Direct Labor Hours Machine Hours
Blending Department
Whole Milk 270 790
Skim Milk 290 720
Cream 240 290
800 1800
Packing Department
Whole Milk 330 460
Skim Milk 520 560
Cream 150 180
1,000 1,200
1,800 3,000
a. Evaluate the single plant-wide factory overhead rate, using each of the subsequent allocation bases: (a) direct labor hours and (b) machine hours.
b. Evaluate the product factory overhead costs, using (a) the direct labor hours plant-wide factory overhead rate and (b) the machine hour plant-wide factory overhead rate.
c. Evaluate the multiple production department factory overhead rates, using machine hours for direct labor hours for the Packing Department and the Blending Department.