Question

Bright Day Company produces two beverages, Hi-Voltage and Easy Slim. Data about these products follow. Production volume Liquid materials Dry materials Bottles Labels Hi-Voltage 10,500 bottles 2,000 gallons 720 pounds 10,500 bottles 4 labels per bottle 400 setups 200 MH Easyslim 240,000 bottles 29,000 gallons 15,000 pounds 240,000 bottles label(s) per - bottle 300 setups 3,150 MH Machine setups Machine hours Additional data from its two production departments follow. Driver Cost $ Department Mixing department Liquid materials Dry materials Utilities Bottling department Bottles Labeling Machine setup Gallons Pounds Machine hours 2.400 10,216 1,340 Units Labels per bottle Setups $150,300 26, 100 14,000 Required: 1 & 2. Determine the cost of each product line using ABC. What is the cost per bottle for Hi-Voltage and Easy Slim? 3. If Hi-Voltage sells for $6.35 per bottle, how much profit does the company earn per bottle of Hi-Voltage that it sells? 4. What is the minimum price that the company should set per bottle of Easy Slim? Complete this question by entering your answers in the tabs below.

Answer 1

Activity	Expected costs	Expected Activity	Activity Rate - Expected costs/Expected Activity	Hi Voltage		EasySlim
				Driver Incurred	Overhead Assigned = Driver Incurred*Activity Rate	Driver Incurred	Overhead Assigned = Driver Incurred*Activity Rate
Mixing Dept
Liquid Material	2480	31000	0.08	2000	160	29000	2320
Dry Material	10218	15720	0.65	720	468	15000	9750
Utilities	1340	3350	0.4	200	80	3150	1260
Bottling Dept
Bottles	150300	250500	0.6	10500	6300	240000	144000
Labeling	26100	522000	0.05	42000	2100	480000	24000
Machine Setup	14000	700	20	400	8000	300	6000
				Total overheads	17108		187330
				Number of units	10500		240000
				Cost per Bottle	1.629333333		0.780541667
	Hi-Voltage
Price per unit	6.35
Cost per unit	1.63
Profit per unit	4.72
Minimum price = cost per bottle i.e. $0.78 per bottle