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 1,700 1,700 550 Overhead cost $ 5,300 10,000 113,300 $ 128,600 $290,000 16,000 10,000 $316,000 Department 2 Machine calibration Labeling Defects Production runs Cases of output Cases of output 800 130,000 130,000 Support 50 Recipe formulation Heat, lights, and water Materials handling $ 98,000 34,000 73,000 $ 205,000 Focus groups Machine hours Container types 1,700 10 Additional production information about its two product lines follows. Units produced Batches Machine hours Focus groups Container types Production runs Extra Fine 28,000 cases 280 batches 650 MH 20 groups 7 containers 280 runs Family Style 102,000 cases 270 batches 1,050 MH 30 groups 3 containers 520 runs

Answer 1

Answer 1
Plantwide overhead rate=Estimated overhead/No. of cases
(128600+316000+205000)/(28000+102000)	$5.00
Answer 2
Extra Fine (4+5)	$9.00	unit
Family style (3+5)	$8.00	unit
Answer 3A
Extra Fine [13-9]	Profit	$4.00
Family style [7-8]	Loss	($1.00)
Answer 3B
management should eliminate family style as it results in negative gross profit