Question

Required information [The following information applies to the questions displayed below.] 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 Department 1 Activity Mixing Cooking Product testing Driver Machine hours Machine hours Batches Quantity 1,000 1,000 600 Department 2 Machine calibration Labeling Defects Overhead cost $ 4,600 10,500 112,600 $ 127,700 $ 255,000 12,500 7,000 $ 274,500 $ 91,000 28,000 66,000 $ 185,000 Production runs Cases of output Cases of output 500 130,000 130,000 Support Recipe formulation Heat, lights, and water Materials handling Focus groups Machine hours Container types 50 1,000 Additional production information about its two product lines follows. Units produced Batches Machine hours Focus groups Container types Production runs Extra Fine 21,000 cases 210 batches 300 MH 32 groups 7 containers 210 runs Family Style 109,000 cases 390 batches 700 MH 18 groups 1 containers 290 runs

Answer 1

solution:

Computation of Overhead allocated per unit
				Extra Fine		Family Style
Activity cost pool	Overhead cost	Activity	Activity Rate	Estimated Activity	Overhead Allocated	Estimated Activity	Overhead Allocated
Mixing & Cooking	$15,100	1000	$15.10	300	$4,530	700	$10,570
Product testing	$112,600	600	$187.67	210	$39,410	390	$73,190
Machine calibration	$255,000	500	$510.00	210	$107,100	290	$147,900
labelling and defects	$19,500	130000	$0.15	21000	$3,150	109000	$16,350
Recipe formulation	$91,000	50	$1,820.00	32	$58,240	18	$32,760
Heat, Light and water	$28,000	1000	$28.00	300	$8,400	700	$19,600
Material handling	$66,000	8	$8,250.00	7	$57,750	1	$8,250
Total					$278,580		$308,620
No. of units					21000		109000
Overhead per unit					$13.27		$2.83

	Extra Fine	Family Style
Direct labor and Materials	$4.00	$3.00
Overhead per unit	$13.27	$2.83
Total Cost per case	$17.27	$5.83