Question

The Clinton Shoppe is a national bakery that is known for its strawberry cheesecake. It makes 12 different kinds of cheesecake as well as many other types of bakery items. It has recently adopted an activity-based costing system to assign manufacturing overhead to products. The following data relate to its strawberry cheesecake and the ABC cost pools:

Strawberry Cheesecake:
Annual production	18,200 Units
Direct materials per unit	$9
Direct labor per unit	$3

Cost Pool	Cost	Cost Driver
Materials Ordering	69,840	Number of purchase orders
Materials inspection	72,520	Number of receiving reports
Equipment setup	84,160	Number of setups
Quality Control	57,860	Number of inspections
Other	103,000	Direct labor cost
Total manufacturing overhead	387,380

Annual activity information related to cost drivers:

Cost Pool	All Products	Strawberry Cheesecake
Materials Ordering	8,730 orders	110
Materials inspection	370 receiving report	5
Equipment setup	2,630 setups	2
Quality Control	2,630 inspections	130
Other	2,060,000 direct labor	54,600

Calculate the overhead rate per unit of activity for each of the five cost pools. (Round overhead rate for Other Cost Pool to 2 decimal places, e.g. 15.25.)

Calculate the total overhead assigned to the production of the strawberry cheesecake.

Calculate the overhead cost per unit for the strawberry cheesecake. (Round answer to 3 decimal places, e.g. 15.254.)

Calculate the total unit cost for the strawberry cheesecake. (Round answer to 3 decimal places, e.g. 15.254.)

Suppose that the Clinton Shoppe allocates overhead by a traditional production volume-based method using direct labor dollars as the allocation base and one cost pool. Determine the overhead rate per direct labor dollar and the per unit overhead assigned to the strawberry cheesecake. (Round answers to 3 decimal places, e.g. 15.254.)

Answer 1

Answer to Question 1: Overhead rates of the cost pools

Question 1 Calculate the activity overhead rates for each activity based on cost pool:s Activity Cost Calculation Activity Cost Drivers 8730 number of Activity rate Per Purchase Materials Ordering $69,840 Purchase Orders 8.00 Order 69,840/8730 Per Receiving Materials Inspection72,520 370 Receiving Report $ Equipment Setup Quality Control 72,520/370 84,160/2630 196.00 Report S84,160 2630 Setups 32.00 Per Setup $ 57,860 2630 Inspections 22.00 Per Inspection 57,860/2630 Per Direct Other 1,03,000 20,60,000 Direct labour $ 0.05 Labour 103,000/20,60,000

Answer to Question 2 & 3: Total overhead of Strawberry Cheesecake as well as overhead unit cost for the same

Answer to Question 4: Total unit cost for Strawberry Cheesecake