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		$20,079
Indirect labor		49,761
Factory electricity		5,675
Indirect materials		11,785
Selling expenses		27,936
Administrative expenses		15,714
	Total costs	$130,950

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			1,500			0.10
Pretzels			5,100			0.15
	Total		11,100

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

Requirement a

Plant wide factory Overhead rate per Labor Hour

$               60.00

Requirement b

	Total Factory Overheads	Per Unit Factory Overheads
Tortia Chips	$          32,400.00	$                  7.20
Patato chips	$            9,000.00	$                  6.00
Pretzels	$          45,900.00	$                  9.00
Total	$          87,300.00

Working

	Budgeted Production Volume (A)	processing Hour per Unit (B)	Total labor Hours for each Product (A x B)
Tortia Chips	4500	0.12	540.00
Patato chips	1500	0.1	150.00
Pretzels	5100	0.15	765.00
Total Labor Hours			1455.00

..

calculation of Predetermined Overhead rate
(A)	Total Overheads	$       87,300.00
(B)	Total Processing Hours	1455.00
(A/B)	Plant wide factory Overhead rate per Labor Hour	$               60.00

.

	Processing Hours (A)	Plant wide factory Overhead rate per Labor Hour (B)	Total Factory Overheads (C= (A xB))	Budgeted production in units (D)	Per unit factory Overheads (C/D)
Tortia Chips	540.00	$               60.00	$ 32,400.00	4500	$       7.20
Patato chips	150.00	$               60.00	$    9,000.00	1500	$       6.00
Pretzels	765.00	$               60.00	$ 45,900.00	5100	$       9.00
Total	1455.00		87300.00