Required information [The following information applies to the questions display

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 Activity Driver $ 6,000 Machine hour:s 10,800 Machine hours ProcesS Overhead cost Quantit 2,400 2,400 750 Department 1 Mixing Cooking Product testing Batches 114,000 $ 130,800 $325,000 18,000 6,000 $349,000 Production runs Cases of output Cases of output Department2 Machine calibration Labeling Defects 650 160,000 160,000 Recipe formulation Heat, lights, and water Materials handling Support Focus groups 50 2,400 $ 84,000 42,000 Machine hours 80, Container types $ 206,0e0 Additional production information about its two product lines follows Extra Fine Family Style Units produced Batches Machine hours Focus groups Container types Production runs 35,000 cases 125,000 cases 350 batches 1,000 MH 400 batches 1,400 MH 34 groups 16 groups 4 containers 260 runs 6 containers 390 runs Required 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 $7 per case of Extra Fine and $6 per case of Family Style 3.a. If the market price of Extra Fine Salsa is $15 per case and the market price of Family Style Salsa is $10 per case, determine the gross profit per case for each product. 3.b. What might management conclude about the Family Style Salsa product line?

Explanation / Answer

Ans. 1. Calculation of platwide overhead base on Cases

Step 1: Calculation of Total overhead cost

Department 1 : $130000

Department 2: $349000

Support           :$206000

Total cost        : $685000

cases of output = 160000

cost per cases = 685000/160000 = $4.28125

Overhead cost assign to Extra fine( 35000X4.28125) = $149844

Overhead cost assign to family style (125000X4.28125) = $535156

2. Calculationof cost per case

Extra fine(material cost and labour +overhead cost per cases) = 7+4.28125 = $11.28125

Family style (material cos and labourt+overhead cost per cases) =6+4.28125= $10.28125

3. Calculation of gross profit per cases

Extra fine (15-11.28125)      = $3.71875

Family style (10-10.28125) = -$.28125

3a. Family style product line is unprofitable it is providing loss .28125 for every single cases, means conclude is family style product line is providing loss.

S

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.