Question

Kate’s Kale Chips produces a healthy snack made primarily of kale. Each bag of the product sells for $5. The company computes the manufacturing overhead rate on a quarterly basis based upon the planned number of units to be produced that quarter. The following data are from the projections of Kate’s Kale Chips for the upcoming quarter:

	Projections
Sales		25,000	bags
Production		27,000	bags
Variable manufacturing cost per bag	$	3.00
Sales and distribution costs per bag	$	0.15
Total fixed manufacturing overhead	$	35,100
Fixed administrative overhead	$	23,000

Required:

1. Compute the projected product cost per bag produced under full costing.

2. Compute the projected product cost per bag under variable costing.

(For all requirements, do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Product cost under full costing = Variable Manufacturing cost + Fmoh per bag = 3 + (35,100/27,000) = 4.30
Product cost under variable costing = 3

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