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		$12,633
Indirect labor		31,307
Factory electricity		3,570
Indirect materials		7,414
Selling expenses		17,576
Administrative expenses		9,886
	Total costs	$82,386

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			1,200			0.15
Potato chips			4,200			0.12
Pretzels			5,100			0.10
	Total		10,500

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	$

Answer 1

single plantwide OH rate uses single estimated driver for allocating cost

product	cases	Hours	Total processing hours
Tortilla chips	1,200	0.15	180[1,200*0.15]
Potato chips	4,200	0.12	504[4,200*0.12]
Pretzels	5,100	0.10	510[5,100*0.10]
	10,500		1,194

per hour cost = total cost/ total processing hours

=$82,386/1,194

=$69 per processing hour

we will now allocate cost

product	Total factory OH	Per case factory OH
Tortilla chips	$12,420[$69*180]	$10.40[$12,420/1200case]	round off to nearest cent
Potato chips	$34,776[504*$69]	$8.30[34776/4200]	round off o nearest cent
Pretzels	$35,190[510*$69]	$6.9[$35,190/5100cases]

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