Question

Single Plantwide Factory Overhead Rate Salty Sensations Snacks Company manufactures three types of snack foods tortilla chips, potato chips, and pretrels. The company has budgeted the follewing cests for the upcoming perlod Factory deprediation $27,975 Indirect labor 69,330 Factory electricity 7,906 Indirect materials 16,421 Selling expenses 38,922 Administrative expenses 21,894 Total costs $182,448 Factory overhead is allocated to the three products on the basis of processing hours. The preducts had the fellowing production budget and processing hours per case Budgeted Volume Processing Hours (Cases) Per Case Tortilia chips 3,000 0.10 Potato chips 6,600 0.12 etrels 7,200 0.15 Total 16,800 if required, round all per-case answers to the nearest cent a. Determine the single plantwide factery overhead rate. per processing hour

Answer 1

Answer a)

Calculation of plant wide factory overhead rate

Plant wide overhead rate = Total budgeted factory overheads/ total budgeted processing hours

                                               = $ 121,632/ 2,100 hours

                                               = $ 57.92 per hour

Therefore single plant wide overhead rate is $ 57.92 per hour.

Working notes:

Calculation of factory overheads:

Particulars	Amount (in $)
Factory depreciation	27,975
Indirect Labour	69,330
Factory Electricity	7,906
Indirect materials	16,421
Total	121,632

Note: factory overheads do not include selling expenses and Administrative expenses

Therefore total factory overheads are $ 121,632.

Calculation of total processing hours:

Name of product	Budgeted Volume (Cases)	Processing hours per case	Total Budgeted processing hours (Budgeted volume X processing hours per case)
Tortilla chips	3,000	0.10	300
Potato chips	6,000	0.12	720
Pretzels	7,200	0.15	1,080
Total	16,200		2,100

Therefore processing time are 2,100 hours

Answer b)

Calculation of total factory overhead cost and overhead cost per case

Name of product	Total Budgeted Processing hours	overhead rate per hour	Total Allocated factory overhead (Budgeted processing hours X overhead rate per hour)	Budgeted volume (number of cases)	Per Case Factory overhead (Allocated Factory overheads/Number of cases)
Tortilla chips	300	$ 57.92	$ 17,376.00	3,000	$ 5.792
Potato chips	720	$ 57.92	$ 41,702.40	6,000	$ 6.950
Pretzels	1,080	$ 57.92	$ 62,553.60	7,200	$ 8.688
Total	2,100		$ 1,21,632.00	16,200