Question

Aunt Ethel's Fancy Cookie Company manufactures and sells three flavors of cookies: Macaroon, Sugar, and Buttercream. The batch size for the cookies is limited to 1,000 cookies based on the size of the ovens and cookie molds owned by the company. Based on budgetary projections, the information listed below is available: Macaroon Sugar Buttercream Projected sales in units 500,000 800,000 600,000 PER UNIT data: Selling price $0.80 $0.75 $0.60 Direct materials $0.20 $0.15 $0.14 Direct labor $0.04 $0.02 $0.02 Hours per 1000-unit batch: Direct labor hours 2 1 4 Oven hours 7 1 Packaging hours 0.5 0.5 0.5 Total overhead costs and activity levels for the year are estimated as follows: Activity Overhead costs Activity levels Direct labor 2,400 hours 1,900 oven hours Oven $210,000 Packaging $150,000 950 packaging hours $360,000 Required:

Required:

a.   Using the ABC system, for the sugar cookie:

      1.   compute the estimated overhead costs per thousand cookies (rounded to two decimal places,4 marks).

      2.   compute the estimated operating profit per thousand cookies (rounded to two decimal places,5 marks).

b.   Using a traditional system (with direct labor hours as the overhead allocation base), for the sugar cookie:

      1.   compute the estimated overhead costs per thousand cookies (2 marks).

      2.   compute the estimated operating profit per thousand cookies (5 marks)

Answer 1

. Solution Pinol from the data - Aunt Ethel's fancy Cookie Company manufactures selle Thore Alavors of cookies ; macaroon, and Sugar, and Buttercream...... ABC System for Sugar Cookle: (Estimates for 1000 units) Sales = 1,000 X 0.75 $ 750 - Direct variable Costs: = 1,000 X 0.15 $150 Direct materials Dixed labour 1,000 X 0.02 $20 Toled direct Costs $ 170 l-overhead Costs :- Oven $ 120 Packaging - (Jago00/1900) x1 (luasool so) xos 950 $75 Tolal overhead $ 195 Costs Operating profil 750-170 - 195

Traditional System for Sugar Cookle : (Estimate for 1000 unils) $750 1000 x0.75 - Dislect variable Costs :- 2 1,000 X 0.15 $150 Direct materials Desteck labour . 1,000 X 0.02 $20 Total direct Costs $ 170 -overhead Costs 370,500 labour hrs.xl 2,400 labour hour per 1,000 Sugar Cookie $ 150.38 operating profit : 750-170-154.38 $495.63 * plean, Give a positive "leke". Thank you.com