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 Quantity 1,900 1,900 1,000 Department 2 Machine calibration Labeling Defects Overhead cost Driver $ 5.500 Machine hours 11,600 Machine hours 113.500 Batches $130,600 $300,000 Production runs 15,000 Cases of output 9,000 Cases of output $324,000 $100,000 Focus groups 38,000 Machine hours 75,000 Container types $213,000 400 120,000 120,000 Support Recipe formulation Heat, lights, and water Materials handling 1.900 Additional production information about its two product lines follows. Units produced Batehes Machine hours Focus groups Container types Production runs Extra Fine 30,000 cases 300 batches 750 MH 30 groups 9 containers 210 runs Family Style 90,000 cases 700 batches 1,150 MM 10 groups 3 containers 190 runs

Answer 1

Answer with working is given below

Total Overheads Department 1 Department 2 Support Total Overheads Total Cases $130,600 $324,000 $213,000 $667,600 $120,000 $5.56 Per Case Plant wide Overhead rate $5.56 per Case 2 Total Product Cost Extra Fine Family Style $6.00 $5.56 $5.56 $11.56 $10.56 Direct Material and Labor Overhead Total Cost $5.00 3 a) Gross profit Selling price Less: Total product cost Gross profit per case Extra Fine Family Style $15.00 $10.00 $11.56 $10.56 $3.44 $0.56 3 b) Since Family Style is having negative Gross margin per case Management shall conclude to discontinue it Activity Mixing and Cooking Product testing Machine calibration Labelling and Defects Recipe formulation Heat, Light and water Material Handling Total Overhead assigned Overhead Cost $17,100 $113,500 $300,000 $24,000 $100,000 $38,000 $75,000 Activity Activity Driver Rate 1,900 $9.00 1,000 $113.50 400 $750.00 120,000 $0.20 40 $2,500.00 1,900 $20.00 12 $6,250.00 Extra Fine Activity Overhead Drivers | Assigned 750 $6,750.00 300 $34,050.00 210 $157,500.00 30000 $6,000.00 30 $75,000.00 750 $15,000.00 9 $56,250.00 $350,550.00 Family Style Activity Overhead Drivers Assigned 1150 $10,350.00 700 $79,450.00 190 $142,500.00 90000 $18,000.00 10 $25,000.00 1150 $23,000.00 $18,750.00 $317,050.00 Total Cases Overhead per case 30,000 $11.69 90,000 $3.52 5 Gross profit Extra Fine Family Style $15.00 $10.00 Selling price Less: Direct Material and Labor Overhead assigned Gross profit per case $5.00 $6.00 $11.69 -$2.69 $3.52 $1.48