Chapter 4, Problem 4.3SE

Compute departmental overhead rates (Learning Objective 1)

Snyder Snacks makes potato chips, corn chips, and cheese puffs using three different production lines within the same manufacturing plant. Currently, Snyder uses a single plantwide overhead rate to allocate its $3,311,500 of annual manufacturing overhead. Of this amount, $2,070,000 is associated with the potato chip line, $763,000 is associated with the corn chip line, and $478,500 is associated with the cheese puff line. Snyder’s plant is currently running a total of 17,900 machine hours: 11,500 in the potato chip line, 3,500 in the corn chip line, and 2,900 in the cheese puff line. Snyder considers machine hours to be the cost driver of manufacturing overhead costs.

1. 1. What is Snyder’s plantwide overhead rate?
2. 2. Calculate the departmental overhead rates for Snyder’s three production lines. Round all answers to the nearest cent.
3. 3. Which products have been overcosted by the plantwide rate? Which products have been undercosted by the plantwide rate?