Question

Multiple Production Department Factory Overhead RatesGwinnett County Chrome Company manufactures three chrome-plated products—automobile bumpers,valve covers, and wheels. These products are manufactured in two production departments (Stamping and Plating). The factory overhead for Gwinnett County Chrome is $239,200.The three products consume both machine hours and direct labor hours in the two production departments as follows:Direct Labor Hours Machine HoursStamping Department Automobile bumpers 590 810 Valve covers 310 570 Wheels 350 620 1,250 2,000 Plating Department Automobile bumpers 195 1,150 Valve covers 200 700 Wheels 195 750 590 2,600 Total 1,840 4,600 The management of Gwinnett County Chrome Company now plans to use the multiple production department factory overhead rate method. The total factory overhead associated with each department is as follows:Stamping Department $120,000Plating Department 104,000Total $224,000Required:1. Determine the multiple production department factory overhead rates, using direct labor hours for the Stamping Department and machine hours for the Plating Department.Stamping Department $ per direct labor hourPlating Department $ per machine hour2. Determine the product factory overhead costs, using the multiple production department rates in (1).Automobile bumpers Valve covers WheelsStamping Department $ $ $Plating Department Total factory overhead $ $ $

Answer 1

The Stamping Department rate is per direct labor hour and the Plating Department rate is $40 per machine hour. Total factory overhead = $102,640. Total factory overhead = $57,760. Total factory overhead = $63,600

1. To calculate the multiple production department factory overhead rates, we use the following formula: rate = total overhead ÷ total measure of activity.

Stamping Department rate = $120,000 ÷ 1,250 direct labor hours = $96 per direct labor hour

Plating Department rate = $104,000 ÷ 2,600 machine hours = $40 per machine hour

2. To calculate the product factory overhead costs, we multiply the rate with the measure of the activity of each product.

Automobile bumpers:
Stamping Department = $96 x 590 direct labor hours = $56,640
Plating Department = $40 x 1,150 machine hours = $46,000
Total factory overhead = $56,640 + $46,000 = $102,640

Valve covers:
Stamping Department = $96 x 310 direct labor hours = $29,760
Plating Department = $40 x 700 machine hours = $28,000
Total factory overhead = $29,760 + $28,000 = $57,760

Wheels:
Stamping Department = $96 x 350 direct labor hours = $33,600
Plating Department = $40 x 750 machine hours = $30,000
Total factory overhead = $33,600 + $30,000 = $63,600