Single Plantwide Factory Overhead Rate

Spotted Cow Dairy Company manufactures three productswhole milk, skim milk, and creamin two production departments, Blending and Packing. The factory overhead for Spotted Cow Dairy is $241,500.

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			220			620
Skim milk			240			560
Cream			200			220
			660			1,400
Packing Department
Whole milk			310			340
Skim milk			490			420
Cream			150			140
			950			900
	Total		1,610			2,300

Required:

1. Determine the single plantwide factory overhead rate, using each of the following allocation bases: (a) direct labor hours and (b) machine hours. If required, round all amounts to the nearest dollar.

a. Direct labor overhead rate	$ per direct labor hour
b. Machine hour overhead rate	$ per machine hour

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.

	Whole Milk	Skim Milk	Cream
Direct labor hours	$	$	$
Machine hours	$	$	$

1. Multiple Production Department Factory Overhead Rates

   Spotted Cow Dairy Company manufactures three productswhole milk, skim milk, and creamin two production departments, Blending and Packing. The factory overhead for Spotted Cow Dairy is $496,400.

   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			610			830
   Skim milk			390			670
   Cream			300			530
   			1,300			2,030
   Packing Department
   Whole milk			180			1,280
   Skim milk			190			780
   Cream			175			840
   			545			2,900
   	Total		1,845			4,930

   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	$247,000
   Packing Department	249,400
   Total	$496,400

   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.

   Blending Department	$ per direct labor hour
   Packing Department	$ per machine hour

   2. Determine the product factory overhead costs, using the multiple production department rates in (1).

   	Whole milk		Skim milk		Cream
   Blending Department factory overhead	$		$		$
   Packing Department factory overhead
   Total factory overhead	$		$		$

1. Allocating Selling and Administrative Expenses using Activity-Based Costing

   Shrute Inc. manufactures office copiers, which are sold to retailers. The price and cost of goods sold for each copier are as follows:

   Price	$720	per unit
   Cost of goods sold	430
   Gross profit	$290	per unit

   In addition, the company incurs selling and administrative expenses of $279,440. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related to its three major nonmanufacturing activities: customer service, sales order processing, and advertising support. The advertising support is in the form of advertisements that are placed by Shrute Inc. to support the retailer's sale of Shrute copiers to consumers. The budgeted activity costs and activity bases associated with these activities are:

   Activity		Budgeted Activity Cost			Activity Base
   Customer service			$35,760		Number of service requests
   Sales order processing			22,680		Number of sales orders
   Advertising support			221,000		Number of ads placed
   	Total activity cost		$279,440

   Activity-base usage and unit volume information for the three customers is as follows:

   	The Warehouse			Kosmo Co.		Supply Universe		Total
   Number of service requests	50			10		180		240
   Number of sales orders	240			100		500		840
   Number of ads placed	20			20		130		170
   Unit volume	640			640		640		1,920

   Required:

   1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar.

   	Activity Rate
   Customer Service	$	per serv. req.
   Sales Order Processing	$	per bid
   Advertising Support	$	per customer design change

   2. Determine the activity costs allocated to the three customers, using the activity rates in (1).

   	Activity Costs
   The Warehouse	$
   Kosmo Co.	$
   Supply Universe	$

   3. Construct customer profitability reports for the three customers, dated for the year ended December 31, 2016, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Enter all amounts as positive numbers, except for a negative income from operations.

   Shrute Inc.
   Customer Profitability Report
   For the Year Ended December 31
   	The Warehouse	Kosmo Co.	Supply Universe
   Revenues	$	$	$
   Cost of goods sold
   Gross profit	$	$	$
   Selling and administrative activities:
   Customer service	$	$	$
   Sales order processing
   Advertising support
   Total selling and administrative activities	$
   Income (loss) from operations	$	$	$