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	$	5,800		Machine hours	2,200
	Cooking		12,900		Machine hours	2,200
	Product testing		113,800		Batches	1,000
		$	132,500
Department 2	Machine calibration	$	315,000		Production runs	500
	Labeling		20,000		Cases of output	145,000
	Defects		9,000		Cases of output	145,000
		$	344,000
Support	Recipe formulation	$	82,000		Focus groups	40
	Heat, lights, and water		33,000		Machine hours	2,200
	Materials handling		78,000		Container types	8
		$	193,000

Additional production information about its two product lines follows.

	Extra Fine		Family Style
Units produced	33,000	cases	112,000	cases
Batches	330	batches	670	batches
Machine hours	900	MH	1,300	MH
Focus groups	30	groups	10	groups
Container types	6	containers	2	containers
Production runs	240	runs	260	runs

4. Using ABC, compute the total cost per case for each product type if the direct labor and direct materials cost is $9 per case of Extra Fine and $8 per case of Family Style. (Round your intermediate calculations to 2 decimal places. Round "Activity Rate" and "Overhead cost per unit" answers to 2 decimal places.)

Answer 1

										Extra fine			Family style
			overhead	Avtivity Driver			Activity rate			Activity Drivers		overhead	Activity Drivers		overhead
4)	Activity		cost									assinged			assinged
	Mixing & cooking		18,700	2,200	machine hours		8.5	per machine hour		900		7650	1300		11050
	product testing		113,800	1000	Batches		113.8	per batch		330		37554	670		76246
	Machine Calibration		315,000	500	production run		630	per production run		240		151200	260		163800
	Labeling & Defects		29,000	145,000	cases of output		0.2	per case		33000		6600	112,000		22400
	Recipe formulation		82,000	40	Focus groups		2050	per focus group		30		61500	10		20500
	heat,light and water		33,000	2,200	machine hours		15	per machine hour		900		13500	1300		19500
	Material handling		78,000	8	container type		9750	per container type		6		58500	2		19500
			669,500							total OH cost assign		336504	total OH cost assign		332996
										total units produced		33,000	total units produced		112,000
										oh cost per unit		10.20	oh cost per unit		2.97
									Extra	Family
									fine	Style
						Direct materials & direct labor			9.00	8.00
						overhead			10.20	2.97
						tota cost/case			19.20	10.97