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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 $31,360
Indirect labor 78,400
Factory electricity 7,840
Indirect materials 35,400
Selling expenses 25,000
Administrative expenses 18,000
Total costs $196,000

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 4,000 0.20
Potato chips 5,000 0.15
Pretzels 2,500 0.40
Total 11,500

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

Required:
a. Determine the single plantwide factory overhead rate.
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.

Sagot :

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Answer:

Results are below.

Explanation:

First, we need to calculate the total number of hours:

Tortilla chips= 4,000*0.20= 800

Potato chips= 5,000*0.15= 750

Pretzels= 2,500*0.40= 1,000

Total number of hours= 2,550

Now, we need to calculate the plant-wide manufacturing overhead:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 196,000 / 2,550

Predetermined manufacturing overhead rate= $76.86 per hour

Finally, the total and unitary overhead per case:

Tortilla chips= 800*76.86= $61,488

Potato chips= 750*76.86= $57,645

Pretzels= 1,000*76.86= $76,860

Unitary:

Tortilla chips= 61,488 / 4,000= $15.372

Potato chips= 57,645 /5,000= $11.53

Pretzels= 76,860 / 2,500= $30.744

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