In: Accounting
14.
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 | $ | 5,200 | Machine hours | 1,600 | |
Cooking | 10,800 | Machine hours | 1,600 | |||
Product testing | 113,200 | Batches | 500 | |||
$ | 129,200 | |||||
Department 2 | Machine calibration | $ | 285,000 | Production runs | 750 | |
Labeling | 10,500 | Cases of output | 155,000 | |||
Defects | 5,000 | Cases of output | 155,000 | |||
$ | 300,500 | |||||
Support | Recipe formulation | $ | 97,000 | Focus groups | 50 | |
Heat, lights, and water | 34,000 | Machine hours | 1,600 | |||
Materials handling | 72,000 | Container types | 8 | |||
$ | 203,000 | |||||
Additional production information about its two product lines
follows.
Extra Fine | Family Style | |||
Units produced | 27,000 | cases | 128,000 | cases |
Batches | 270 | batches | 230 | batches |
Machine hours | 600 | MH | 1,000 | MH |
Focus groups | 40 | groups | 10 | groups |
Container types | 6 | containers | 2 | containers |
Production runs | 270 | runs | 480 | runs |
4. 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 Fine and $9 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.)
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