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 Department 2 Machine calibration Labeling Defects Overhead cost $ 5,300 10,000 113,300 $128,600 $ 290,000 16,000 10,000 $316,000 $ 98,000 34,000 73,000 $ 205,000 Production runs Cases of output Cases of output 800 130,000 130,000 Support 50 Recipe formulation Heat, lights, and water Materials handling Focus groups Machine hours Container types 1,700 20 Additional production information about its two product lines follows. Units produced Batahes 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

Solution 4:

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	$15,300	1700	$9.00	650	$5,850	1050	$9,450
Product testing	$113,300	550	$206.00	280	$57,680	270	$55,620
Machine calibration	$290,000	800	$362.50	280	$101,500	520	$188,500
labelling and defects	$26,000	130000	$0.20	28000	$5,600	102000	$20,400
Recipe formulation	$98,000	50	$1,960.00	20	$39,200	30	$58,800
Heat, Light and water	$34,000	1700	$20.00	650	$13,000	1050	$21,000
Material handling	$73,000	10	$7,300.00	7	$51,100	3	$21,900
Total					$273,930		$375,670
No. of units					28000		102000
Overhead per unit					$9.78		$3.68

	Extra Fine	Family Style
Direct labor and Materials	$4.00	$3.00
Overhead per unit	$9.78	$3.68
Total Cost per case	$13.78	$6.68

Solution 3:

	Extra Fine	Family Style
Selling price per unit	$13.00	$7.00
Cost per unit	$13.78	$6.68
Gross profit per unit	-$0.78	$0.32