Reference no: EM131804404

Problem

Kettle Snacks makes potato chips, corn chips, and cheese puffs using three different production lines within the same manufacturing plant. Currently, Kettle uses a single plant-wide overhead rate to allocate its $ 3,315,000 of annual manufacturing overhead. Of this amount, $ 2,014,000 is associated with the potato chip line, $ 672,000 is associated with the corn chip line, and $ 629,000 is associated with the cheese puff line. Kettle's plant is currently running a total of 17,000 machine hours: 10,600 in the potato chip line, 3,000 in the corn chip line, and 3,400 in the cheese puff line. Kettle considers machine hours to be the cost driver of manufacturing overhead costs.

1. What is Kettle's plantwide overhead rate?

2. Calculate the departmental overhead rates for Kettle's three production lines. Round all answers to the nearest cent.

3. Which products have been overcosted by the plantwide rate? Which products have been undercosted by the plantwide rate?