Question

Bright Day Company produces two beverages, Hi-Voltage and EasySlim. Data about these products follow.

	Hi-Voltage		EasySlim
Production volume	10,000	bottles	280,000	bottles
Liquid materials	1,000	gallons	37,000	gallons
Dry materials	920	pounds	5,000	pounds
Bottles	10,000	bottles	280,000	bottles
Labels	3	labels per bottle	1	label(s) per bottle
Machine setups	400	setups	600	setups
Machine hours	220	MH	3,300	MH

Additional data from its two production departments follow.

Department	Driver	Cost
Mixing department
Liquid materials	Gallons	$	2,280
Dry materials	Pounds		1,776
Utilities	Machine hours		2,112
Bottling department
Bottles	Units	$	145,000
Labeling	Labels per bottle		9,300
Machine setup	Setups		25,000

Required:
1 & 2. Determine the cost of each product line using ABC. What is the cost per bottle for Hi-Voltage and EasySlim?
3. If Hi-Voltage sells for $6.65 per bottle, how much profit does the company earn per bottle of Hi-Voltage that it sells?

Answer 1

		Expected Activity
		Hi-Voltage	EasySlim	Total
	Production volume	10,000	280,000	290,000	bottles
	Liquid materials	1,000	37,000	38,000	gallons
	Dry materials	920	5,000	5,920	pounds
	Bottles	10,000	280,000	290,000	bottles
	Labels	3	1	4	labels per bottle
	Machine setups	400	600	1,000	setups
	Machine hours	220	3,300	3,520	MH
			A	B	A/B	Activity Used		Activity Used
	Department	Driver	Cost	Expected Activity	Activity Rate	Hi-Voltage	EasySlim	Hi-Voltage	EasySlim
	Mixing department:
	Liquid materials	Gallons	2,280	38,000	0.06	1,000	37,000	60	2,220
	Dry materials	Pounds	1,776	5,920	0.3	920	5,000	276	1,500
	Utilities	Machine hours	2,112	3,520	0.6	220	3,300	132	1,980
	Bottling department:
	Bottles	Units	145,000	290,000	0.5	10,000	280,000	5,000	140,000
	Labeling	Labels per bottle	9,300	4	2325	3	1	6,975	2,325
	Machine setup	Setups	25,000	1,000	25	400	600	10,000	15,000
							Total	22,443	163,025
							Total Bottles	10,000	280,000
							Cost PU	2.24	0.58
	Sales Price	6.65
	Less: Cost	2.24
	Profit PU	4.41