Question

required information: Sara’s salsa company produces its condiments in two types: Extra fine for restaurants 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 process and the company’s production support activities follow ... picture...using a plant wide 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. 4 tabs thanks

Required information Problem 17-5A Pricing analysis with ABC and a plantwide overhead rate LO A1, A2, P1, P3 [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 i Activity Mixing Cooking Product testing Driver Machine hours Machine hours Batches Quantity 1,500 1,500 6ee Department 2 Machine calibration Labeling Defects Overhead cost $ 4,509 11,250 112,500 $ 128, 250 $ 250, eee 12,000 6,eee $ 268,000 $ 90, eee 27,eee 65, eee $ 182,eee Production runs Cases of output Cases of output 400 120,000 120,000 Support Recipe formulation Heat, lights, and water Materials handling 45 1,500 Focus groups Machine hours Container types Additional production information about its two product lines follows. Units produced Batches Machine hours Focus groups Container types Production runs Extra Fine 20,000 cases 200 batches 500 MH 3e groups 5 containers 200 runs Family Style 1ᏄᏬ , c@$$ . 400 batches 1,800 MH 15 groups 3 containers 200 runs

Answer 1

Answer to Requirement 1:

Estimated overhead cost = Estimated overhead cost of department 1 + Estimated overhead cost of department 2 + Estimated overhead cost of department 3
Estimated overhead cost = $128,250 + $268,000 + $182,000
Estimated overhead cost = $578,250

Estimated cases of output = 120,000

Plantwide overhead rate = Estimated overhead cost / Estimated cases of output
Plantwide overhead rate = $578,250 / 120,000
Plantwide overhead rate = $4.82 per case

Answer to Requirement 2:

Extra Fine:

Overhead assigned per case = $4.82

Total cost per unit = Direct materials and Direct labor + Overhead assigned
Total cost per unit = $6.00 + $4.82
Total cost per unit = $10.82

Family Style:

Overhead assigned per case = $4.82

Total cost per unit = Direct materials and Direct labor + Overhead assigned
Total cost per unit = $5.00 + $4.82
Total cost per unit = $9.82

Answer to Requirement 3:

Extra Fine:

Gross profit per unit = Selling price per unit - Total cost per unit
Gross profit per unit = $18.00 - $10.82
Gross profit per unit = $7.18

Family Style:

Gross profit per unit = Selling price per unit - Total cost per unit
Gross profit per unit = $9.00 - $9.82
Gross profit per unit = -$0.82

Conclusion about the Family Style Salsa product line: Eliminate Family Style