Question

Single Plantwide Factory Overhead Rate

Scrumptious Snacks Inc. 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		$25,116
Indirect labor		62,244
Factory electricity		7,098
Indirect materials		14,742
Selling expenses		34,944
Administrative expenses		19,656
	Total costs	$163,800

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			4,200			0.10
Potato chips			6,000			0.12
Pretzels			5,400			0.15
	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 overhead rate in (a) to determine the amount of total and per-case 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	$

Multiple Production Department Factory Overhead Rate Method

Handy Leather, Inc., produces three sizes of sports gloves: small, medium, and large. A glove pattern is first stenciled onto leather in the Pattern Department. The stenciled patterns are then sent to the Cut and Sew Department, where the glove is cut and sewed together. Handy Leather uses the multiple production department factory overhead rate method of allocating factory overhead costs. Its factory overhead costs were budgeted as follows:

Pattern Department overhead		$131,100
Cut and Sew Department overhead		220,400
	Total	$351,500

The direct labor estimated for each production department was as follows:

Pattern Department		2,300	direct labor hours
Cut and Sew Department		2,900
	Total	5,200	direct labor hours

Direct labor hours are used to allocate the production department overhead to the products. The direct labor hours per unit for each product for each production department were obtained from the engineering records as follows:

Production Departments	Small Glove		Medium Glove		Large Glove
Pattern Department	0.04		0.05		0.06
Cut and Sew Department	0.07		0.09		0.11
Direct labor hours per unit	0.11		0.14		0.17

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

a. Determine the two production department factory overhead rates.

Pattern Department	$per dlh
Cut and Sew Department	$per dlh

b. Use the two production department factory overhead rates to determine the factory overhead per unit for each product.

Small glove	$ per unit
Medium glove	$ per unit
Large glove	$ per unit

Answer 1

1
Factory depreciation	25116
Indirect labor	62244
Factory electricity	7098
Indirect materials	14742
Total factory overhead	109200
	Budgeted Volume	Processing Hours Per Case	Budgeted Processing Hours
Tortilla chips	4200	0.10	420
Potato chips	6000	0.12	720
Pretzels	5400	0.15	810
Total			1950
a
Total factory overhead	109200
Divide by Total Processing Hours	1950
Single plantwide factory overhead rate	56	per processing hour
b
	Total Factory Overhead	Per-Case Factory Overhead
Tortilla chips	23520	5.60
Potato chips	40320	6.72
Pretzels	45360	8.40
Total	109200
	Total Factory Overhead	Per-Case Factory Overhead
Tortilla chips	=420*56	=23520/4200
Potato chips	=720*56	=40320/6000
Pretzels	=810*56	=45360/5400
Question -2
a
Pattern Department	57	per dlh	=131100/2300
Cut and Sew Department	76	per dlh	=220400/2900
b
Small glove	7.60	per unit	=(0.04*57)+(0.07*76)
Medium glove	9.69	per unit	=(0.05*57)+(0.09*76)
Large glove	11.78	per unit	=(0.06*57)+(0.11*76)