**Educational Content: Cost Allocation in Manufacturing**### Main Street Ice Cream Company OverviewThe Main Street Ice Cream Company employs a plantwide allocation method to distribute overhead costs. This method uses direct labor-hours at a rate of $2 per labor-hour. The company produces the following flavors:- **Strawberry** and **Vanilla** - Manufactured in Department SV.- **Chocolate** - Produced in Department C.**Management:**- **Department SV** is managed by Sven.- **Department C** is managed by Charlene.### Product Costs (Per Thousand Gallons)| | Strawberry | Vanilla | Chocolate ||----------------------|------------|---------|-----------|| Direct labor | $754 | $829 | $1,129 || Raw materials | $804 | $504 | $604 |### Requirements#### a. Calculate Total Cost Using Plantwide Allocation- **Labor Hours Per 1,000 Gallons:** - Strawberry: 55 hours - Vanilla: 65 hours - Chocolate: 150 hoursCompute the total cost of 1,000 gallons for each flavor utilizing plantwide allocation.#### b. Departmental Differences in Overhead AllocationCharlene, managing an older department, requested a breakdown of overhead costs as follows:| | Department SV | Department C ||----------------------|---------------|--------------|| Overhead | $90,864 | $13,104 || Machine-hours | 25,240 | 36,400 || Labor-hours | 25,240 | 18,200 |**Allocation Bases:**- Department SV: Machine-hours- Department C: Labor-hoursCompute the allocation rates based on these parameters.#### c. Determine Cost Using Departmental Allocation RatesAssess the cost of 1,000 gallons for each flavor using departmental allocation rates (from requirement b). The machine-hours needed per 1,000 gallons are: - Strawberry: 55 hours- Vanilla: 65 hours- Chocolate: 154 hoursContinue using the same direct labor-hours as in requirement (a).### Explanation of Overhead Allocation Concepts**Overhead Allocation:** A method to distribute indirect costs to different departments or products. Here, machine-hours and labor-hours serve as bases for distributing these costs.**Plantwide Rate:** A single overhead rate applied across all products and departments

Production cost is the total cost incurred for producing a product .It includes direct…

Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direct labor-hours at a rate of $2 per labor-hour. Strawberry and vanilla flavors are produced in Department SV. Chocolate is produced in Department C. Sven manages Department SV and Charlene manages Department C. The product costs (per thousand gallons) follow. Direct labor (per 1,000 gallons) Raw materials (per 1,000 gallons) Strawberry $754 804 Vanilla $ 829 504 Chocolate $1,129 604

Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direct labor-hours at a rate of $2 per labor-hour. Strawberry and vanilla flavors are produced in Department SV. Chocolate is produced in Department C. Sven manages Department SV and Charlene manages Department C. The product costs (per thousand gallons) follow. Direct labor (per 1,000 gallons) Raw materials (per 1,000 gallons) Strawberry $754 804 Vanilla $ 829 504 Chocolate $1,129 604

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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