Question

Question 13

(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 Quantity 1,700 1,700 550 Department 2 Machine calibration Labeling Defects Overhead cost Driver $ 5,300 Machine hours 10,000 Machine hours 113,300 Batches $ 128,600 $ 290,000 Production runs 16,000 Cases of output 10,000 Cases of output $316,000 $ 98,000 Focus groups 34,000 Machine hours 73,000 Container types $ 205,000 800 130,000 130,000 Support Recipe formulation Heat, lights, and water Materials handling 50 1,700 10 Additional production information about its two product lines follows. Units produced Batches Machine hours Focus groups Container types Production runs Extra Fine 28,000 cases 280 batches 650 MH 20 groups 7 containers 280 runs Family Style 102,000 cases 270 batches 1,050 MH 30 groups 3 containers 520 runs

Answer 1

		Table showing the cost per unit of Extra Fine and Family Style under ABC method
Activity	Overhead cost(a)	Driver	Quantity(b)	Cost per driver(a/b)
Mixing	5,300	Machine hours	1700	3.12
Cooking	10,000	Machine hours	1,700	5.88
Product testing	1,13,300	Batches	550	206.00
Machine calibration	2,90,000	Production runs	800	362.50
Labelling	16,000	Cases of output	130000	0.12
Defects	10,000	Cases of output	130000	0.08
Recipe formulation	98,000	Focus groups	50	1960.00
Heat lighting and water	34,000	Machine hours	1700	20.00
Material handling	73,000	Container types	10	7300.00
		Table showing assigning of overhead costs
Activity	Quantity per driver(as per above table)			Overhead costs
	Extra Fine(a)	Family Style(b)	Cost per driver©	Extra Fine(a*c)	Family Style(b*c)
Mixing	650	1050	3.12	$         2,026.47	$         3,273.53
Cooking	650	1050	5.88	$         3,823.53	$         6,176.47
Product testing	280	270	206.00	$       57,680.00	$       55,620.00
Machine calibration	280	520	362.50	$ 1,01,500.00	$ 1,88,500.00
Labelling	28,000	102,000	0.12	$         3,446.15	$       12,553.85
Defects	28,000	102,000	0.08	$         2,153.85	$         7,846.15
Recipe formulation	20	30	1960.00	$       39,200.00	$       58,800.00
Heat lighting and water	650	1050	20.00	$       13,000.00	$       21,000.00
Material handling	7	3	7300.00	$       51,100.00	$       21,900.00
Total				$ 2,73,930.00	$ 3,75,670.00
Number of units				28,000	102,000
Overhead cost per unit				$                9.78	$                3.68
Table showing cost per unit
	Extra Fine	Family Style
Direct material and direct labour	$                4.00	$                3.00
Overhead	$                9.78	$                3.68
Total	$              13.78	$                6.68

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