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		$24,331
Indirect labor		60,298
Factory electricity		6,876
Indirect materials		14,281
Selling expenses		33,852
Administrative expenses		19,041
	Total costs	$158,679

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			6,000			0.10
Potato chips			6,900			0.15
Pretzels			2,700			0.12
	Total		15,600

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 plant wide factory overhead rate = estimated factory overhead rate/total processing hours

                                                                            =$105,786/1,959

                                                                            =$54 per processing hour

(note :selling and administrative are not overhead expense )

Total processing hours

Tortilla chips 6,000*0.10	600
Potato chips 6,900*0.15	1,035
Pretzels 2,700*0.12	324
Total hours	1,959

b)

	Total factory overhead	Per case
Tortilla chips 600*54	$32,400                   (600.54)	$5.4                  (32,400/6,000)
Potato chips	$55,890                   (1,035*54)	$8.10                (55,890/6,900)
pretzels	$17,496                   (324*54)	$6.48              (17,496/2,700)
total	$105,786