Question

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	Activity	Overhead cost			Driver	Quantity
Department 1	Mixing	$	4,600		Machine hours	2,700
	Cooking		11,600		Machine hours	2,700
	Product testing		114,300		Batches	600
		$	130,500
Department 2	Machine calibration	$	340,000		Production runs	800
	Labeling		20,000		Cases of output	135,000
	Defects		7,000		Cases of output	135,000
		$	367,000
Support	Recipe formulation	$	87,000		Focus groups	75
	Heat, lights, and water		54,000		Machine hours	2,700
	Materials handling		83,000		Container types	8
		$	224,000

Additional production information about its two product lines follows.

	Extra Fine		Family Style
Units produced	38,000	cases	97,000	cases
Batches	380	batches	220	batches
Machine hours	1,150	MH	1,550	MH
Focus groups	64	groups	11	groups
Container types	3	containers	5	containers
Production runs	290	runs	510	runs
education.com/ow/connecthtm Saved Additional production information about its two product lines follows Extra Fine 38,000 cases 380 batches 1.15e 64 groups 3 containers 230 runs Fanlly Style 97,000 cases 220 batches 1,550 13 groups 5 contalners s10 runs Units produced Satches Machine hours focus groups Container types Production runs Using ABC, compute the total cost per case for each product type if the direct labor and direct materials cost is $10 per case of Extra se and $8 per case of Famly Style. (Round your intermediate calculations to 2 decimal pleces. Round "Activity Rete" and verhead cost per unit" answers to 2 decimal places) Extra fine Family Style tivity Overhead Cost Overhead Overhead assigned Activity Drivers Activity Rate Activity Drivers Activity Drivers assigned Midng & Cooking Product tesling Machine callbration Labeling&Delects Recipe formlion Heat, Ight and water Material handling Extra fine Family Style of 14 Naxt> <Prev 13 14 M.6576pg MO 6377 jpg

Answer 1

4.ABC

Activity	Cost	Driver	Rate	Extra fine		Family style
				Driver	Overhead	Driver	Overhead
Mining and cooking	16,200	2,700	6	1,150	6,900	1,550	9,300
Testing	114,300	600	190.5	380	72,390	220	41,910
Calibration	340,000	800	425	290	123,250	510	216,750
Labelling and defects	27,000	135,000	0.2	38,000	7,600	97,000	19,400
Recipe	87,000	75	1,160	64	74,240	11	12,760
Heat, light and water	54,000	2,700	20	1,150	23,000	1,550	31,000
Material handling	83,000	8	10,375	3	31,125	5	51,875
				Total	338,505		382,995
				Per unit	8.91		3.95

Total cost

	Extra Fine	Family Style
Direct Material and Direct Labor	10	8
Overhead	8.91	3.95
Total Cost	$18.91	$11.95

Gross Profit:

	Extra Fine	Family Style
Market Price	18	13
Total Cost	18.91	11.95
Gross profit	-$0.91	$1.05
	Loss	Profit