$24 100 total 2.200 total $30 20 total 800 total

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Rastatter, Inc. is a manufacturer of Fish-tachios, a fish product that "tastes exactly like pistachios, but is made primarily of reconstituted
fish bits." Rastatter, Inc. has two main flavor varieties of the popular snack: BBQ and Salt & Vinegar. Rastatter, Inc. currently uses a
traditional costing system and applies manufacturing overhead on the basis of direct labor hours.
Due to falling popularity of the product that management believes is due to pricing issues, management is considering moving to an
activity-based costing system. There are three major production activities and appropriate cost drivers: machine set up, general factory,
and machine processing. The cost drivers for these three activities are number of set ups, direct labor hours, and machine hours,
respectively.
The following information relates to Rastatter, Inc.'s operations:
BBQ Fish-tacios
2,500 units
Production volume
Direct material
Direct labor*
Machine setups
Machine hours
*The direct labor wage rate is $12 per hour
$40 per unit
$24 per unit
100 total
2,200 total
Budgeted manufacturing costs by activity are as follows:
Machine setup overhead vosts
Machine processing overhhead costs
General factory overhead costs
What is the total cost distortion related to each product line?
O A. $1,687,500
B. $1,489,500
O C. $198,000
O D. $760,500
O E. $562,500
$240,000
$120,000
$1,250,000
Salt & Vinegar Fish-tachios
5,000 units
$60 per unit
$36 per unit
20 total
800 total
Transcribed Image Text:Rastatter, Inc. is a manufacturer of Fish-tachios, a fish product that "tastes exactly like pistachios, but is made primarily of reconstituted fish bits." Rastatter, Inc. has two main flavor varieties of the popular snack: BBQ and Salt & Vinegar. Rastatter, Inc. currently uses a traditional costing system and applies manufacturing overhead on the basis of direct labor hours. Due to falling popularity of the product that management believes is due to pricing issues, management is considering moving to an activity-based costing system. There are three major production activities and appropriate cost drivers: machine set up, general factory, and machine processing. The cost drivers for these three activities are number of set ups, direct labor hours, and machine hours, respectively. The following information relates to Rastatter, Inc.'s operations: BBQ Fish-tacios 2,500 units Production volume Direct material Direct labor* Machine setups Machine hours *The direct labor wage rate is $12 per hour $40 per unit $24 per unit 100 total 2,200 total Budgeted manufacturing costs by activity are as follows: Machine setup overhead vosts Machine processing overhhead costs General factory overhead costs What is the total cost distortion related to each product line? O A. $1,687,500 B. $1,489,500 O C. $198,000 O D. $760,500 O E. $562,500 $240,000 $120,000 $1,250,000 Salt & Vinegar Fish-tachios 5,000 units $60 per unit $36 per unit 20 total 800 total
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