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	$	6,000		Machine hours	2,400
	Cooking		10,800		Machine hours	2,400
	Product testing		114,000		Batches	750
		$	130,800
Department 2	Machine calibration	$	325,000		Production runs	650
	Labeling		18,000		Cases of output	160,000
	Defects		6,000		Cases of output	160,000
		$	349,000
Support	Recipe formulation	$	84,000		Focus groups	50
	Heat, lights, and water		42,000		Machine hours	2,400
	Materials handling		80,000		Container types	10
		$	206,000

Additional production information about its two product lines follows.

	Extra Fine		Family Style
Units produced	35,000	cases	125,000	cases
Batches	350	batches	400	batches
Machine hours	1,000	MH	1,400	MH
Focus groups	34	groups	16	groups
Container types	4	containers	6	containers
Production runs	260	runs	390	runs

Problem 17-5A Part 4

4. Using ABC, compute the total cost per case for each product type if the direct labor and direct materials cost is $7 per case of Extra Fine and $6 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

Ans.						Extra Fine	Family Style
	Activity	Overhead cost	Activity drivers	Activiy rate	Activity driver incurred	Overhead assigned	Activity driver incurred	Overhead assigned
		( A)	(B)	©	(D)	(E = C*D)	(F)	(G = C*F)
	Department 1 :
	Mixiing and cooking	$16,800	2400	$7	per machine hour	1000	$7,000	1400	$9,800
	Product testing	$114,000	750	$152	per batch	350	$53,200	400	$60,800
	Department 2 :
	Machine calibration	$325,000	650	$500	per production run	260	$130,000	390	$195,000
	Labeling and defects	$24,000	160000	$0	per case	35000	$5,250	125000	$18,750
	Department 3 :
	Recipe formulation	$84,000	50	$1,680	per group	34	$57,120	16	$26,880
	Heat, lights, and water	$42,000	2400	$18	per machine hour	1000	$17,500	1400	$24,500
	Materials handling	$80,000	10	$8,000	per container type	4	$32,000	6	$48,000
					Total Overhead Cost	$302,070		$383,730
		Extra Fine	Family Style
	Total overhead cost	$302,070	$383,730
	(/) Units produced	35,000	125,000
	Overhead cost per case	$8.63	$3.07
	*Costs with same activities are calculated jointly. *Total cost per unit includes materials labor and overhead cost per unit.
		Extra Fine	Family Style
	Materials & labor cost per case	$7.00	$6.00
	Overhead cost per case	$8.63	$3.07
	Total cost per case	$15.63	$9.07