Question

Problem 17-4A Evaluating product line costs and prices using ABC LO P3

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

	Hi-Voltage		EasySlim
Production volume	11,000	bottles	270,000	bottles
Liquid materials	1,000	gallons	29,000	gallons
Dry materials	1,320	pounds	3,000	pounds
Bottles	11,000	bottles	270,000	bottles
Labels	4	labels per bottle	3	label(s) per bottle
Machine setups	700	setups	400	setups
Machine hours	200	MH	3,750	MH

Additional data from its two production departments follow.

Department	Driver	Cost
Mixing department
Liquid materials	Gallons	$	2,400
Dry materials	Pounds		1,296
Utilities	Machine hours		1,185
Bottling department
Bottles	Units	$	84,300
Labeling	Labels per bottle		34,160
Machine setup	Setups		27,500

Problem 17-4A Parts 1, 2 & 3

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 $7.65 per bottle, how much profit does the company earn per bottle of Hi-Voltage that it sells?

Req 1 to 2

    Hi- Voltage EasySlim

Activity    Expected Costs    Expected Activity    Activity Rate    Activity driver incurred Overhead assigned Activity driver incurred Overhead assigned

Mixing department

Liquid materials $________ ____________Gallons __________ Per gallon ______________ _____________ $ ________________ $ _______   

Dry materials

Utilities

Bottling department

Total overhead cost

Production volume (bottles)

Average cost per bottle

Req 3

If Hi-Voltage sells for $7.65 per bottle, how much profit does the company earn per bottle of Hi-Voltage that it sells? (Do not round intermediate calculations and round your final answers to 2 decimal places.)

Price per unit

Cost per Unit

Profit (loss) per unit

Bottles Labeling

Machine setup

Answer 1

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Part 1 & 2					Hi Voltage		Easy Slim
Activity	Drivers	Expected Cost	Expected Activity	Activity Rate	Driver	Overhead Assigned	Driver	Overhead Assigned
		a	b	c=a/b	d	d*c	e	e*c
Mixing department
Liquid materials	Gallons	$            2,400	30,000	0.08	1,000	$                          80	29,000	$                     2,320
Dry materials	Pounds	$            1,296	4,320	0.30	1,320	$                        396	3,000	$                        900
Utilities	Machine hours	$            1,185	3,950	0.30	200	$                          60	3,750	$                     1,125
Total						$                        536		$                     4,345
Bottling department
Bottles	Units	$          84,300	281,000	0.30	11,000	$                     3,300	270,000	$                   81,000
Labeling	Labels per bottle	$          34,160	7	4,880.00	4	$                   19,520	3	$                   14,640
Machine setup	Setups	$          27,500	1,100	25.00	700	$                   17,500	400	$                   10,000
Total						$                   40,320		$                 105,640
Grand Total						$                   40,856		$                 109,985
Production Volume						11,000		270,000
Cost per Unit						$                       3.71		$                       0.41
Part 3
Sales Price		$              7.65
Less: Cost per unit		$              3.71
Profit per unit		$              3.94