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Sara’s Salsa Company produces its condiments in two types: Extra Fine for restaurant customers and Family Style for home use. Salsa is prepared in department 1 and packaged in department 2. The activities, overhead costs, and drivers associated with these two manufacturing processes and the company’s production support activities follow.

Process	Activity	Overhead cost			Driver	Quantity
Department 1	Mixing	$	4,600		Machine hours	2,700
	Cooking		11,600		Machine hours	2,700
	Product testing		114,300		Batches	600
		$	130,500
Department 2	Machine calibration	$	340,000		Production runs	800
	Labeling		20,000		Cases of output	135,000
	Defects		7,000		Cases of output	135,000
		$	367,000
Support	Recipe formulation	$	87,000		Focus groups	75
	Heat, lights, and water		54,000		Machine hours	2,700
	Materials handling		83,000		Container types	8
		$	224,000

Additional production information about its two product lines follows.

	Extra Fine		Family Style
Units produced	38,000	cases	97,000	cases
Batches	380	batches	220	batches
Machine hours	1,150	MH	1,550	MH
Focus groups	64	groups	11	groups
Container types	3	containers	5	containers
Production runs	290	runs	510	runs

Required:
1. Using a plantwide overhead rate based on cases, compute the overhead cost that is assigned to each case of Extra Fine Salsa and each case of Family Style Salsa.
2. Using the plantwide overhead rate, determine the total cost per case for the two products if the direct materials and direct labor cost is $10 per case of Extra Fine and $8 per case of Family Style.
3.a. If the market price of Extra Fine Salsa is $18 per case and the market price of Family Style Salsa is $13 per case, determine the gross profit per case for each product.
3.b. What might management conclude about the Family Style Salsa product line?

ul e ule total cost p LUS IS $10 per case of Extra Fine and $8 per case of Family Style 3.a. If the market price of Extra Fine Salsa is $18 per case and the gross profit per case for each product. 3.b. What might management conclude about the Family Style Sa Complete this question by entering your answers in the tabs Req 1 Req 2 Req ЗА, Req 3B If the market price of Extra Fine Salsa is $18 per case and the market pu the gross profit per case for each product. (Round your intermediate cald Extra Fine Family Style < Req 2 Req3

Answer 1

1.Plantwide overhead rate = Total overheads/Total number of cases

= (130,500+367,000+224,000)/(38,000+97,000)

= 721,500/135,000

= $5.34 per unit

2.Total cost

	Extra Fine	Family Style
Direct Material and Direct Labor	10	8
Overhead	5.34	5.34
Total Cost	$15.34	$13.34

3AGross Profit:

	Extra Fine	Family Style
Market Price	18	13
Total Cost	15.34	13.34
Gross profit	$2.66	-$0.34

3B Eliminate family style, because of gross loss