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 2,300 2,300 850 Department 2 Machine calibration Labeling Defects Overhead cost $ 5,900 12,500 113,900 $ 132,300 $320,000 19,000 8,000 $347,000 $ 83,000 46,000 79,000 $208,000 Production runs Cases of output Cases of output 500 150,000 150,000 Support Recipe formulation Heat, lights, and water Materials handling Focus groups Machine hours Container types 50 2,300 8 Additional production information about its two product lines follows. Units produced Batches Machine hours Focus groups Container types Production runs Extra Fine 34,000 cases 340 batches 950 MH 32 groups 5 containers 250 runs Family Style 116,000 cases 510 batches 1,350 MH 18 groups 3 containers 250 runs Required: 1. Using a plantwide 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. 2. Using the plantwide overhead rate, determine the total cost per case for the two products if the direct materials and direct labor cost is $10 per case of Extra Fine and $9 per case of Family Style. 3.a. If the market price of Extra Fine Salsa is $19 per case and the market price of Family Style Salsa is $13 per case, determine the gross profit per case for each product. 3.b. What might management conclude about the Family Style Salsa product line? Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Req ЗА Req 3B Using a plantwide 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. (Round your intermediate calculations and final answers to 2 decimal places.) Plantwide overhead rate per case Reg 1 Reg 2 >

Answer 1

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Sara’s Salsa Company
Answer 1
Total Overhead	Amount $
Department 1	132,300.00
Department 2	347,000.00
Department 3	208,000.00
Total Overhead	687,300.00
OH assigned	Extra	Family	Amount $
Manufacturing overhead			687,300.00	A
Number of cases	34,000.00	116,000.00	150,000.00	B
Calculation of Plant wide OH Rate			4.582	C=A/B
OH assigned	155,788.00	531,512.00	687,300.00	D=C*B
Answer 2	Extra	Family
Direct materials & Direct labor	10.00	9.00
OH assigned per case	4.58	4.58		See C
Total cost per case	14.58	13.58
Answer 3.a	Extra	Family
Sell price	19.00	13.00
Total cost per case	14.58	13.58
Gross profit per case	4.42	(0.58)
Answer 3.b
It can be concluded that Family style is incurring loss.