lyCost Data for Almond Dream, Krispy Krackle, and Creamy CrunchProduct costsLabor-hours per caseTotal cases producedMaterial cost per caseDirect labor cost per caseLabor-hours per productTotal overhead = $69,500Total labor-hours = 11,000Direct labor costs per hour = $6Allocation rate per labor-hour = (a).Costs of productsAlmond Dream Krispy Krackle Creamy CrunchA71,000$8$427,000$842Material cost per caseDirect labor cost per caseAllocated overhead per case (to be computed) (b)Product cost(e)31,000$2$183,000$21800(c)S11,000$9$61,000$96(d)(g)Based on the additional data, determine the product cost and gross profit margin percentages ofeach product using the three allocation bases (labor-hours, machine-hours, and square feet) todetermine the allocation assigned to each product.B. Would management recommend dropping any product based on the criterion of dropping productswith less than 10 percent gross profit margin?C. Based on the recommendation you make in requirement (b), recalculate the allocations and profitmargins to determine whether any of the remaining products should be dropped from the product line. Ifso, substantiate the profitability of remaining products.Focus Jean Sharpe decides to gather additional data to identify the cause of overhead costs and figure outwhich products are most profitable. She notices that $30,000 of the overhead originated from theequipment used. She decides to incorporate machine-hours into the overhead allocation base todetermine the effect on product profitability. Almond Dream requires 2 machine-hours per case, KrispyKrackle requires 7 hours per case, and Creamy Crunch requires 6 hours per case. Additionally, Jeannotices that the $15,000 per month spent to rent 10,000 square feet of factory space accounts for almost22 percent of the overhead. The assignment of square feet is 1,000 to Almond Dream, 4,000 to KrispyKrackle, and 5,000 to Creamy Crunch. Jean decides to incorporate this into the allocation base for therental costs.Because labor-hours are still an important cost driver for overhead, Jean decides that she should uselabor-hours to allocate the remaining $24,500.CBI still plans to produce 1,000 cases each of Almond Dream, Krispy Krackle, and Creamy Crunch.Assume that CBI can sell all products it manufactures and that if it drops any products, it will use excesscapacity to produce additional cases of the most profitable product. Overhead will remain $69,500 permonth under all alternatives.

This question is based on cost allocation of Cost Accounting . A. Statement showing Gross Profit and…

Cost Data for Almond Dream, Krispy Krackle, and Creamy Crunch Product costs Labor-hours per case Total cases produced Material cost per case Direct labor cost per case duct Almond Dream Krispy Krackle Creamy Crunch 7 1,000 $8 $42 7.000 3 1,000 $2 $18 3,000 1 1,000 $9 $6 1,000

Cost Data for Almond Dream, Krispy Krackle, and Creamy Crunch Product costs Labor-hours per case Total cases produced Material cost per case Direct labor cost per case duct Almond Dream Krispy Krackle Creamy Crunch 7 1,000 $8 $42 7.000 3 1,000 $2 $18 3,000 1 1,000 $9 $6 1,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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