Question

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 $33,120
Indirect labor 82,800
Factory electricity 8,280
Indirect materials 31,800
Selling expenses 22,000
Administrative expenses 29,000
Total costs $207,000

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 3,000 0.25
Potato chips 6,000 0.10
Pretzels 3,500 0.30
Total 12,500

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

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

Answer 1

Answer:

Results are below.

Explanation:

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

Processing hours= (0.25*3,000) + (0.1*6,000) + (0.3*3,500)

Processing hours= 750 + 600 + 1,050

Processing hours= 2,400

Now, we can calculate the predetermined overhead rate:

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

Predetermined manufacturing overhead rate= 207,000 / 2,400

Predetermined manufacturing overhead rate=$86.25 per processing hour

To allocate overhead, we need to use the following formula:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Tortilla chips= 86.25*75= 64,687.5

Potato chips= 600*86.25= 51,750

Pretzels= 86.25*1,050= 90,562.5

Finally, the unitary cost:

Tortilla chips= 64,687.5 / 3,000= $21.56

Potato chips= 51,750 / 6,000= $8.63

Pretzels= 90,562.5 / 3,500= $25.88

Answer 2

a) The single plant-wide factory overhead rate = $12.48 ($156,000/12,500) per processing hour

b. The Allocation of Factory Overhead costs are as follows:

                             Processing Hours                  Per Case

Tortilla chips       $37,440 ($12.48 x 3,000)        $3.12 ($12.48 x 0.25)

Potato chips         74,880 ($12.48 x 6,000)          1.25 ($12.48 x 0.10)

Pretzels                43,680 ($12.48 x  3,500)         3.74 ($12.48 x 0.30)

Total                  $156,000 ($12.48 x 12,500)

Data and Calculations:

Factory overhead costs:

Factory depreciation         $33,120

Indirect labor                      82,800

Factory electricity                8,280

Indirect materials               31,800  

Total factory overhead $156,000

Budgeted Volume (Cases) Processing Hours   Per Case

Tortilla chips                             3,000                   0.25

Potato chips                             6,000                    0.10

Pretzels                                    3,500                    0.30

Total                                        12,500

Thus, under generally accepted accounting principles, the overhead allocated to the three products will equal $156,000.

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