A

B

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 $27,283 Indirect labor 67,613 Factory electricity 7.710 Indirect materials 16,014 Selling expenses 37,958 Administrative expenses 21,352 Total costs $177,930 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 1,500 0.10 Potato chips 6,900 0.15 Pretzels 6,600 0.12 Total 15,000 If required, round all per-case answers to the nearest cent. 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 Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion The management of Nova Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Nova: Fabrication Department factory overhead $430,000 Assembly Department factory overhead 172,000 Total $602,000 Direct labor hours were estimated as follows: Fabrication Department 4,300 hours Assembly Department 4,300 Total 8,600 hours In addition, the direct labor hours (dih) used to produce a unit of each product in each department were determined from engineering records, as follows: Gasoline Engine Diesel Engine Production Departments Fabrication Department 1.30 dlh 2.70 dih Assembly Department 2.70 1.30 Direct labor hours per unit 4.00 dih 4.00 dih a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using direct labor hours as the activity base. Gasoline engine $ per unit Diesel engine per unit b. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department. Gasoline engine $ per unit Diesel engine per unit C. Recommend to management a product costing approach, based on your analyses in (a) and (b). Management should select the multiple department factory overhead rate method of allocating overhead costs. The single plantwide factory overhead rate method indicates that both products have the same factory overhead per unit. Each product uses the direct labor hours differently Thus, the multiple department rate method avoids the cost distortions by accounting for the overhead in each production department separately