Question

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: 1 Factory depreciation $35,101.00 2 Indirect labor 87,752.00 3 Factory electricity 8,775.00 Indirect materials 47,552.00 5 Selling expenses 25,200.00 6 Administrative expenses 15,000.00 Total costs $219,380.00 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:

Answer 1

Volume Processing a) Items (Cases) Hours/Case Tortila chips 3,600 0.19 Potato chips 5,500 0.19 Pretzels 2,700 Totals Estimated total overhead costs Plantwide factory overhead rate Processing Hours 684 [3600 Cases x 0.19 Hours] 1,045 (5500 Cases x 0.19 Hours] 1,161 [2700 Cases x 0.43 Hours) 2,890 $179,180 $62.00 ($179180 / 2890 hours] 0.43 NOTE: Selling expenses & Administrative expenses are not factory overhead costs and so they are ignored in overhead rate calculation. b) Items Tortila chips Potato chips Pretzels Totals Total Fact. OH $42,408 $64,790 $71,982 $179,180 Per Case Fact. OH $11.78 [Total Fact. OH = 684 hours x $62; Per Case Fact. OH = $42408 / 3600 Cases] $11.78 [Total Fact. OH = 1045 hours x $62; Per Case Fact. OH = $64790 / 5500 Cases] $26.66 [Total Fact. OH = 1161 hours x $62; Per Case Fact. OH = $71982 / 2700 Cases]