Question

Required Information The following information applies to the questions displayed below.] 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 urs Quantity 2,900 2,900 500 Process Activity Overhead cost Driver Department 1 Mixing $ 7,000 Machine hours Cooking 16,200 Machine hours Product testing 114,500 Batches $137,700 Department 2 Machine calibration $350,000 Production runs Labeling 18,500 Cases of output Defects 9,500 Cases of output $378,000 Support Recipe formulation $ 89,000 Focus groups Heat, lights, and water 58,000 Machine hours Materials handling 85,000 Container types $232,000 700 140,000 140,000 50 2,900 Additional production information about its two product lines follows. Units produced Batches Machine hours Focus groups Container types Production runs Extra Fine 40,000 cases 400 batches 1,250 MH 32 groups 5 containers 310 runs Family Style 100,000 cases 100 batches 1,650 MH 18 groups 5 containers 390 runs

1. Using a plantwide overhead rate based on cases, compute the overhead cost that is assigned to each case of Extra Fine Salsa and each case of Family Style Salsa.
2. Using the plantwide overhead rate, determine the total cost per case for the two products if the direct materials and direct labor cost is $11 per case of Extra Fine and $7 per case of Family Style.
3.a. If the market price of Extra Fine Salsa is $19 per case and the market price of Family Style Salsa is $12 per case, determine the gross profit per case for each product.
3.b. What might management conclude about the Family Style Salsa product

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

Plantwide overhead rate 5.34 per case Working Notes Total overhead Department 1 Department 2 Support Total 137,700 378,000 232,000 747,700 Total Number of cases Extra fine Family Style Total 40,000 100,000 140,000 Predetermined overhead rate (747,700 / 140,000) 5.34

Extra fine Family style Total cost per unit 16.34 unit 12.34 unit Working Notes Extra fine Direct material & labor Overhead applied Cost per unit 11.00 5.34 16.34 Family Style Direct material & labor Overhead applied Cost per unit 7.00 5.34 12.34

3A) $ 2.66 Extra fine Family style Profit Loss (0.34)| Working Notes Extra fine Market price Cost per unit Profit/ (Loss) per unit 19.00 (16.34) 2.66 Family Style Market price Cost per unit Profit/(Loss) per unit 12.00 (12.34) (0.34) 3B) Eliminate the Family style Conclude about the Family style salsa product line

Activity Mixing & Cooking (7,000 + 16,200) Product testing Machine calibration Labeling & Defects (18,500 +9,500) Receipe formulation Heat, light and water Material handling Overhead costs [A] 23,200 114,500 350,000 28,000 89,000 58,000 85,000 Activity Drivers [B] 2,900 Machine hours 500 Batches 700 Production runs 140,000 cases of output 50 Focus groups 2,900 Machine hours 10 container types Extra fine Family Style Overhead Activity rate Activity drivers assigned Activity drivers (C = A/B] [D] [CD] [E] 8.00 per machine hour 1,250 10,000 1,650 229.00 per batch 400 91,600 100 500.00 per production runs 310 155,000 390 0.20 per case 40,000 8,000 100,000 1,780.00 per groups 32 56,960 18 20.00 per machine hour 1,250 25,000 8,500.00 per type 42,500 Total Overhead costs assigned $ 389,060 Total Overhead costs assigned Total Units produced 40,000 Total Units produced Overhead cost per unit $ 9.73 Overhead cost per unit Overhead assigned (CXE] 13,200 22,900 195,000 20,000 32,040 33,000 42,500 $ 358,640 100,000 $ 3.59 1,650 Extra Fine Direct material & Labor Overhead applied Total Cost/Case Family Style 11.00 $ 7.00 9.73 $ 3.59 20.73 $ 10.59

-5) $ Extra fine Family style Loss Profit (1.73) 1.41 Working Notes Extra fine Market price Cost per unit Profit /(Loss) per unit 19.00 (20.73) (1.73) Family Style Market price Cost per unit Profit/(Loss) per unit 12.00 (10.59) 1.41