Question

ork Problems 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 1 Activity Mixing Cooking Product testing Driver Machine hours Machine hours Batches Quantity 2,eee 2,000 see Department 2 Machine calibration Labeling Defects Overhead cost $ 5,600 11,200 113,600 $ 130,400 $ 305,000 17, see 4,500 $ 327, $ se,eee 38,eee 76,eee $ 194,eee Production runs Cases of output Cases of output 400 110,eee 119, eee Support Recipe formulation Heat, lights, and water Materials handling Focus groups Machine hours Container types se 2,000 Additional production Information about its two product lines follows Units produced Batches Machine hours Focus groups Container types Production runs Extra Fine 31,000 cases 310 batches See MH 55 groups 6 containers 22e runs Family style 79,eee cases 49e batches 1,200 25 groups 2 containers 15e runs Problem 17-5A Part 4 4. Using ABC, compute the total cost per case for each product type of the direct labor and direct materials cost is $7 per case of Fine and $6 per case of Family Style (Round your intermediate calculations to 2 decimal places. Round "Activity Rate and "Overhead cost per unit" answers to 2 decimal places.) Overhead Cost Activity Drivers Activity Rate Activit Activity Moding & Cooking Product testing Machine calibration Labeling & Defects Recipe formulation

Answer 1

Req 1.
Activity cost allocation
Activity			Overheads	Driver	Activity rate	Extra Fine	Family Style
							Driver	OH cost	Driver	OH cost
Mixing			5600	2000	2.8	per MH	800	2240	1200	3360
Cooking			11200	2000	5.6	Per MH	800	4480	1200	6720
Product Testing		113600	800	142	Per batch	310	44020	490	69580
Machine Calibration		305000	400	762.5	Per run	220	167750	180	137250
Labelling			17500	110000	0.16	per case	31000	4960	79000	12640
Defects			4500	110000	0.041	per case	31000	1271	79000	3239
Recipe formulation		80000	80	1000	per group	55	55000	25	25000
Heat, light and water		38000	2000	19	per MH	800	15200	1200	22800
Material handling		76000	8	9500	Per type	6	57000	2	19000
					Total Overheads		351921		299589
					Divide: Units produced	31000		79000
					OH cost per case		11.35		3.79
Total cost per unit
			Extra Fine	Family Style
Material and labour cost	7	6
Add: OH cost per unit	11.35	3.79
Total cost per unit		18.35	9.79
Req 2.
			Extra Fine	Family Style
Selling price per case		16	11
Less: Total cost per case	-18.35	-9.79
Net income (loss) per case	-2.35	1.21
Extra Fine	Loss	-2.35	per case
Family style	Profit	1.21	per case