Question

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		$23,184
Indirect labor		57,456
Factory electricity		6,552
Indirect materials		13,608
Selling expenses		32,256
Administrative expenses		18,144
	Total costs	$151,200

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			4,500			0.12
Potato chips			5,700			0.10
Pretzels			6,600			0.15
	Total		16,800

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) Estimated processing hours = (4500*.12+5700*.10+6600*.15) = 2100 Hours

Single plant wide overhead rate = Estimated overhead/Estimated processing hours = 151200/2100 = $72 per processing hours

b) Calculate total and per case overhead

	Total factory overhead	Per Case factory overhead
Tortilla chips	4500*.12*72 = 38880	38880/4500 = 8.64
Potato chips	5700*.10*72 = 41040	41040/5700 = 7.20
Pretzels	6600*.15*72 = 71280	71280/6600 = 10.80
Total	151200