Required informatio [The following information applies to the questions displaye

Question

Required informatio [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 follovw Activity Overhead cost Driver Quantity 1,900 1,900 1,000 Process Department 1 Mixing $5,500 11,600 113,500 $130,600 Machine hours Machine hours Batches Cooking Product testing Department 2 Machine calibration Labeling Defects $300,000 15,000 9,000 Production runs Cases of output Cases of output 400 120,000 120,000 $324,000 Recipe formulation Heat, 1lights, and water Materials handling Support $100,000 38,000 75,000 $213,000 Focus groups Machine hours Container types 40 1,900 12 Additional production information about its two product lines follows Extra Fine Family Style Units produced Batches Machine hours Focus groups Container types Production runs 30,000 cases 90,000 cases 300 batches 750 MH 700 batches 1,150 MH 30 groups 10 groups 9 containers 210 runs 3 containers 190 runs

Explanation / Answer

Req1. Estimated Overheads 667600 (130600+324000+213000) Divide: Number of cases 120000 Oh cost per case 5.56 Per case Oh cost allocated: Extra Fine family Store Units produced 30000 90000 OH cost per case 5.56 5.56 OH cost allocated 166800 500400 Req 2. Extra Fine Family Store Direct material and labour 6 5 Oh cost per case 5.56 5.56 Total cost per case 11.56 10.56 Req 3. Gross profit per case: Extra Fine Family Store Selling price per case 15 10 Less: Total cost per case 11.56 10.56 Gross profit per case 3.44 -0.56 Req 3-b: The management may decide to close down the operation of Product Family style

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