Question

Ch 4-6 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 Quantity 1,600 1,6ee 500 Process Activity Overhead cost Driver Department 1 Mixing $ 5,299 Machine hours Cooking 10,800 Machine hours Product testing 113,200 Batches $129,200 Department 2 Machine calibration $285,000 Production runs Labeling 10,589 cases of output Defects 5,000 Cases of output $300, 500 Support Recipe formulation $ 97,000 Focus groups Heat, lights, and water 34,000 Machine hours Materials handling 72,000 Container types $203, eee 750 155,000 155,000 50 1,600 Additional production Information about its two product lines follows Units produced Batches Machine hours Focus groups Container types Production runs Extra Fine 27,000 cases 270 batches 600 MH 40 groups 6 containers 270 runs Family Style 128,cases 230 batches 1,600 MH 10 groups 2 containers 480 runs 4. UN ABC compute the total cost per case for each product type if the direct labor and direct manas costs 10 per case of Extra Fine and percase of Famey Style Round your intermediate calculations to 2 decimal places. Round "Activity Rate and "Overhead cost per unit answers to 2 decimal places)

Answer 1

Answer)

Assignment of overhead costs using Activity Based Costing

Activity

Overhead Cost

Activity Drivers

Activity Rate

Extra Fine

Family Style

Activity Drivers

Overheads Assigned

Activity Drivers

Overheads Assigned

Mixing and Cooking

$ 1,6000

1,600 Machine Hours

$ 10.00 per machine hour

600 Machine hours

$ 6000

1,000 Machine hours

$ 10,000

Product Testing

$ 113,200

500 Batches

$ 226.40 per batch

270 Batches

$ 61,128

230 batches

$ 52,072

Machine Calibration

$ 285,000

750 Production runs

$ 380 per production run

270 Production runs

$ 102,600

480 Production runs

$ 182,400

Labelling and Defects

$ 15,500

155,000 Cases of output

$ 0.10 per case

27,000 cases

$ 2,700

128,000 cases

$ 12,800

Recipe Formulation

$ 97,000

50 Focus groups

$ 1,940 per focus group

40 focus groups

$ 77,600

10 focus groups

$ 19,400

Heat, lights,and water

$ 34,000

1,600 Machine Hours

$ 21.25 per machine hour

600 Machine hours

$ 12,750

1,000 Machine hours

$ 21,250

Materials Handling

$ 72,000

8 Containers

$ 9,000 per container

6 Containers

$ 54,000

2 Containers

$ 18,000

Total overhead costs assigned

$ 316,778

$ 315,922

Number of Cases Produced

27,000

128000

Overhead Cost per case

$ 11.73

$ 2.47

Calculation of Total cost per case for each type of case

Costs

Extra Fine

Family Style

Material and Labour Cost per case

$ 10.00

$ 9.00

Overhead cost per case

$ 11.73

$ 2.47

Total Cost per case

$ 21.73

$11.47

Note: Therefore total cost per case for Extra Fine is $ 21.73 and for Family Style $ 11.47.

Working Notes:

Calculation of Activity rates:

Mixing and Cooking:

                                     = (Total Mixing overheads + Total Cooking Overheads)/ Total machine hours

                                     = ($ 5,200 + $ 10,800)/ 1,600 machine hours.

                                     = $ 10.00 per machine hours

               

Product Testing:

                                     = (Total overhead cost)/ Number of batches

                                     = ($ 113,200)/ 500 batches

                                     = $ 226.40 per batch

Machine Calibration:

                                     = (Total overhead cost)/ Number of production runs

                                     = ($ 285,000)/ 750 production runs

                                     = $ 380 per production run.

Labelling and Defects:

                                     = (Total Labelling overheads + Total Defects Costs)/ Total Cases of output

                                     = ($ 10,500 + $ 5,000)/ 155,000 cases

                                     = $ 0.10 per case.

Recipe Formulation:

                                     = (Total overhead cost)/ Number of focus groups

                                     = ($ 97,000)/ 50 Focus groups

                                     = $ 1,940 per focus group.

Heat, lights and water:

                                     = (Total overhead cost)/ Total machine hours

                                     = ($ 34,000)/ 1,600 machine hours

                                     = $ 21.25 per machine hour

Materials Handling:

                                     = (Total overhead cost)/ Total number of containers

                                     = ($ 72,000)/ 8 containers

                                     = $ 9,000 per container.

Overhead cost per case:

Extra Fine:

                    = Total Assigned overheads/Total number of cases produced

                   = $ 316,778/ 27,000 cases

                   = $ 11.73 per case

Family Style:

                    = Total Assigned overheads/Total number of cases produced

                   = $ 315,922/ 128,000 cases

                   = $ 2.47 per case