Question

Bright Day Company produces two beverages, Hi-Voltage and EasySlim. Data about these products follow. Required:
1 & 2. Determine the cost of each product line using ABC. What is the cost per bottle for Hi-Voltage and EasySlim?
3. If Hi-Voltage sells for $5.85 per bottle, how much profit does the company earn per bottle of Hi-Voltage that it sells?
4. What is the minimum price that the company should set per bottle of EasySlim?

Bright Day Company produces two beverages, Hi-Voltage and EasySlim. Data about these products follow. Production volume Liquid materials Dry materials Bottles Labels Hi-Voltage 10,500 bottles 1,200 gallons 720 pounds 10,500 bottles 4 labels per bottle 700 setups 140 MH Easyslim 270,000 bottles 35,000 gallons 5,000 pounds 270,000 bottles , label(s) per bottle 500 setups 3,600 MH Machine setups Machine hours Additional data from its two production departments follow. Driver Cost Department Mixing department Liquid materials Dry materials Utilities Bottling department Bottles Labeling Machine setup Gallons Pounds Machine hours $ 1,810 2,574 1,496 $84,150 Units Labels per bottle Setups 24,000 Required: 1 & 2. Determine the cost of each product line using ABC. What is the cost per bottle for Hi-Voltage and Easy Slim? 3. If Hi-Voltage sells for $5.85 per bottle, how much profit does the company earn per bottle of Hi-Voltage that it sells? 4. What is the minimum price that the company should set per bottle of Easy Slim?

Answer 1

Part 1 & 2
		Hi-Voltage	EasySlim	Total
	Production Volume	10500	270000	280500	bottles
	Liquid Materials	1200	35000	36200	gallons
	Dry Materials	720	5000	5720	pounds
	Bottles	10500	270000	280500	bottles
	Labels	4	2	6	labels per bottle
	Machine setups	700	500	1200	setups
	Machine Hours	140	3600	3740	MHs
	Computation of ABC rate
	Activity	OH Costs(Col 1)	No. of activity base(Col 2)	Activity Rate(Col 1 / Col 2)
	Liquid Materials	$                                           1,810	36,200	$                               0.05	per gallons
	Dry Materials	$                                           2,574	5,720	$                               0.45	per pound
	Utilities	$                                           1,496	3,740	$                               0.40	per Mhs
	Bottles	$                                         84,150	2,80,500	$                               0.30	per bottles
	Labels	$                                         29,100	6	$                        4,850.00	per labels per bottle
	Machine setups	$                                         24,000	1,200	$                             20.00	per setups
		Hi-Voltage	EasySlim
	Liquid Materials	$                                           60.00	$                             1,750.00
	Dry Materials	$                                         324.00	$                             2,250.00
	Utilities	$                                           56.00	$                             1,440.00
	Bottles	$                                      3,150.00	$                           81,000.00
	Labels	$                                    19,400.00	$                             9,700.00
	Machine setups	$                                    14,000.00	$                           10,000.00
	Total Overhead Cost	$                                    36,990.00	$                        1,06,140.00
	No. of units produced	10500	270000
	Overhead Cost per bottle	$                                             3.52	$                                    0.39
Part 3		Hi-Voltage
	Sales Price per bottle	$                                             5.85
	Less:Overhead Cost per bottle	$                                             3.52
	Profit per bottle	$                                             2.33
Part 4	Company should set a minimum selling price of $0.39 per bottle to recover its costs