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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 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:

a. First calculate:
Budgeted production volume for each product x Processing hours. Add together to obtain total processing hours.
Recall that factory overhead does not include selling and administrative expenses. Divide the total of overhead costs by total processing hours to obtain the overhead rate.

b. Calculate:
Overhead Rate in Req. (a) x Processing hours for each product = Overhead for each. Add all overhead amounts to obtain the total. Divide individual overhead amounts by budgeted production volume for each product to obtain overhead per unit.

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