Question

#2

Single Plantwide Factory Overhead Rate

Salty Sensations Snacks Company manufactures three types of snack foods: tortilla chips, potato chips, and pretzels. The company has budgeted the following costs for the upcoming period:

Factory depreciation		$11,233
Indirect labor		27,839
Factory electricity		3,175
Indirect materials		6,593
Selling expenses		15,629
Administrative expenses		8,791
	Total costs	$73,260

Factory overhead is allocated to the three products on the basis of processing hours. The products had the following production budget and processing hours per case:

		Budgeted Volume (Cases)				Processing Hours Per Case
Tortilla chips			5,700			0.15
Potato chips			1,800			0.12
Pretzels			1,500			0.10
	Total		9,000

If required, round all per-case answers to the nearest cent.

a. Determine the single plantwide factory overhead rate.
$ per processing hour

b. Use the factory overhead rate in (a) to determine the amount of total and per-case factory overhead allocated to each of the three products under generally accepted accounting principles.

	Total Factory Overhead	Per-Case Factory Overhead
Tortilla chips	$	$
Potato chips
Pretzels
Total	$

Answer 1

a
Single plantwide factory overhead = $40 per processing hour
b
	Total Factory Overhead	Per-Case Factory Overhead
Tortilla chips	34200	6.00
Potato chips	8640	4.80
Pretzels	6000	4.00
Total	48840
Workings:
Factory depreciation	11233
Indirect labor	27839
Factory electricity	3175
Indirect materials	6593
Total factory overhead	48840
	Processing Hours
Tortilla chips	855	=5700*0.15
Potato chips	216	=1800*0.12
Pretzels	150	=1500*0.1
Total	1221
Single plantwide factory overhead = 48840/1221= $40
	Total Factory Overhead
Tortilla chips	34200	=855*40
Potato chips	8640	=216*40
Pretzels	6000	=150*40
Total	48840
	Per-Case Factory Overhead
Tortilla chips	6	=34200/5700
Potato chips	4.8	=8640/1800
Pretzels	4	=6000/1500