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 $ 7,000 Machine hours 2,900 Cooking 16,200 Machine hours 2,900 Product testing 114,500 Batches 500 $ 137,700 Department 2 Machine calibration $ 350,000 Production runs 700 Labeling 18,500 Cases of output 140,000 Defects 9,500 Cases of output 140,000 $ 378,000 Support Recipe formulation $ 89,000 Focus groups 50 Heat, lights, and water 58,000 Machine hours 2,900 Materials handling 85,000 Container types 10 $ 232,000 Additional production information about its two product lines follows. Extra Fine Family Style Units produced 40,000 cases 100,000 cases Batches 400 batches 100 batches Machine hours 1,250 MH 1,650 MH Focus groups 32 groups 18 groups Container types 5 containers 5 containers Production runs 310 runs 390 runs 4. Using ABC, compute the total cost per case for each product type if the direct labor and direct materials cost is $11 per case of Extra Fine and $7 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
Activity	Overhead Cost	Activity Drivers	Activity Rate		Activity Drivers	Overhead assigned	Activity Drivers	Overhead assigned
Mixing and cooking ($7000+$16200)	$23200	2900	machine hours	$8.00	per machine hours	1250	$10000	1650	$13200
Production testing	$114500	500	batches	$229.00	per batch	400	$91600	100	$22900
Machine calibration	$350000	700	runs	$500.00	per run	310	$155000	390	$195000
Labeling and Defects ($18500+$9500)	$28000	140000	cases	$0.20	per case	40000	$8000	100000	$20000
Recipe formulation	$89000	50	groups	$1780.00	per group	32	$56960	18	$32040
Heat, light and water	$58000	2900	machine hours	$20.00	per machine hour	1250	$25000	1650	$33000
Materials handling	$85000	10	container types	$8500.00	per type	5	$42500	5	$42500
						Total overhead costs assigned	$389060	Total overhead costs assigned	$358640
						Total units produced	40000	Total units produced	100000
						Overhead cost per unit	$9.73	Overhead cost per unit	$3.59
					Extra fine	Family Style
				Direct materials and direct labor	$11	$7
				Overhead	$9.73	$3.59
				Total cost/case	$20.73	$10.59