Question

Please show calculations to support answers.
10 Required information [The following information applies to the questions displayed below.) Part 1 of 3 0.83 oints 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. eBook Process Department Activity Mixing Overhead cost $ 5,700 11,100 113,700 $130,500 Print Driver Machine hours Machine hours Batches Quantity 2,100 2,100 Cooking Product testing 750 References Department Machine calibration $310,000 500 Labeling 18,000 Production runs Cases of output Cases of output 120,000 Defects 120,000 6,000 $334,000 $ 81,000 42,000 Support Recipe formulation Heat, lights, and water Materials handling 50 2,100 Focus groups Machine hours Container types 77,000 7 $ 200,000

Answer 1

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.

Answer:

Plantwide overhead rate

5.54 per case

Calculation:

Department 1	130,500
Department 2	334,000
Support	200,000
Total (A)	664,500

	No. of Cases
Extra fine	32,000
Family style	88,000
Total (B)	120,000

Plantwide overhead rate = Total (A) / Total (B) = 664,500/120,000 = 5.54

2. Using the plantwide overhead rate, determine the total cost per unit for the two products if the direct materials and direct labor cost is $8 per case of Extra Fine and $7 per case of Family Style.

Answer:

	Total cost per unit
Extra Fine	$13.54	unit
Family Style	$12.54	unit

Calculation:

	Extra Fine	Family Style
Direct materials + Direct Labor	8	7
Overhead	5.54	5.54
Total cost per unit	13.54	12.54

3a. Assume the market price of Extra Fine Salsa is $17 per case and the market price of Family Style Salsa is $12 per case, determine the gross profit per case for each product.

Answer:

Extra Fine	Profit	$         3.46
Family Style	Loss	$       (0.54)

Calculation:

	Extra Fine	Family Style
Selling price per case	$           17.00	$           12.00
Total cost per case	$           13.54	$           12.54
Gross profit (loss) per case	$             3.46	$           (0.54)

3b. What might management conclude about the Family Style Salsa product line?

Answer:

Conclude about Family Style Salsa product line

Eliminate Family Style

Explanation:

Family Style salsa is not profitableand has a loss of 0.54 per unit. Company may need to stop this product line if they cannot reduce costs or increase the price per unit.