Sara\'s Salsa Company produces its condiments in two types: Extra Fine for resta

Question

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 Overhead cost Driver $ 4,700 Machine hours Machine hours Quantity 2,800 2,800 650 ProcesS Department 1 Mixing Cooking Product testing 15,600 114,400 $ 134,700 Batches Department 2 Machine calibration Labeling Defects $ 345,000 Production runs Cases of output Cases of output 750 180,000 180,000 18,000 9,000 $ 372,000 $ 88,000 42,000 84,000 $ 214,000 Recipe formulation Heat, lights, and water Materials handling Support Focus groups Machine hours Container types 40 2,800 Additional production information about its two product lines follows. Extra Fine Family Style Units produced Batches Machine hours Focus groups Container types Production runs 39,000 cases 141,00e cases 390 batches 1,200 MH 260 batches 1,600 MH 30 groups 10 groups 4 containers 300 runs 4 containers 450 runs

Explanation / Answer

1) Plantwide overhead rate Estimated overhead/total cases (134700+372000+214000)/(39000+141000) 4.00 plantwide overhead rate $4 per case total cost per unit 2) Extra Fine (8+4) 12 Family Style (9+4) 13 3) Extra Fine profit 2 Family Style loss -1 overhead Avtivity Driver Activity rate 4) Activity cost Mixing & cooking 20,300 2,800 machine hours 7.25 per machine hour product testing 114,400 650 Batches 176 per batch Machine Calibration 345,000 750 production run 460 per production run Labeling & Defects 27,000 180,000 cases of output 0.15 per case Recipe formulation 88,000 40 Focus groups 2200 per focus group heat,light and water 42,000 2,800 machine hours 15 per machine hour Material handling 84,000 8 container type 10500 per container type 720,700 Extra fine Family style Activity Drivers overhead Activity Drivers overhead assinged assinged 1200 8700 1600 11600 390 68640 260 45760 300 138000 450 207000 39000 5850 141,000 21150 30 66000 10 22000 1200 18000 1600 24000 4 42000 4 42000 total OH cost assign 347190 total OH cost assign 373510 total units produced 39,000 total units produced 141,000 oh cost per unit 8.90 oh cost per unit 2.65 Extra Family fine Style Direct materials & direct labor 8.00 9.00 overhead 8.90 2.65 tota cost/case 16.90 11.65 5) Extra Fine loss -2.90 Family Style profit 0.35

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