Problem 04-4A Evaluating product line costs and prices using ABC LO P3 Bright Day Company produces two beverages, Hi-Voltage and EasySlim. Data about these products follow. Hi-Voltage EasySlim Production volume 12,000 bottles 260,000 bottles Liquid materials 1,600 gallons 33,000 gallons Dry materials 1,120 pounds 12,000 pounds Bottles 12,000 bottles 260,000 bottles Labels 3 labels per bottle 2 label(s) per bottle Machine setups 1,000 setups 800 setups Machine hours 200 MH 3,450 MH Additional data from its two production departments follow. Department Driver Cost Mixing department Liquid materials Gallons $ 1,384 Dry materials Pounds 5,904 Utilities Machine hours 1,460 Bottling department Bottles Units $ 163,200 Labeling Labels per bottle 16,680 Machine setup Setups 27,000 Required: 1 & 2. Determine the cost of each product line using ABC. What is the cost per bottle for Hi-Voltage and EasySlim? 3. If Hi-Voltage sells for $7.05 per bottle, how much profit does the company earn per bottle of Hi-Voltage that it sells? 4. What is the minimum price that the company should set per bottle of EasySlim?
Problem 04-4A Evaluating product line costs and prices using ABC LO P3 Bright Day Company produces two beverages, Hi-Voltage and EasySlim. Data about these products follow. Hi-Voltage EasySlim Production volume 12,000 bottles 260,000 bottles Liquid materials 1,600 gallons 33,000 gallons Dry materials 1,120 pounds 12,000 pounds Bottles 12,000 bottles 260,000 bottles Labels 3 labels per bottle 2 label(s) per bottle Machine setups 1,000 setups 800 setups Machine hours 200 MH 3,450 MH Additional data from its two production departments follow. Department Driver Cost Mixing department Liquid materials Gallons $ 1,384 Dry materials Pounds 5,904 Utilities Machine hours 1,460 Bottling department Bottles Units $ 163,200 Labeling Labels per bottle 16,680 Machine setup Setups 27,000 Required: 1 & 2. Determine the cost of each product line using ABC. What is the cost per bottle for Hi-Voltage and EasySlim? 3. If Hi-Voltage sells for $7.05 per bottle, how much profit does the company earn per bottle of Hi-Voltage that it sells? 4. What is the minimum price that the company should set per bottle of EasySlim?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Problem 04-4A Evaluating product line costs and prices using ABC LO P3
Bright Day Company produces two beverages, Hi-Voltage and EasySlim. Data about these products follow.
| Hi-Voltage | EasySlim | |||
| Production volume | 12,000 | bottles | 260,000 | bottles |
| Liquid materials | 1,600 | gallons | 33,000 | gallons |
| Dry materials | 1,120 | pounds | 12,000 | pounds |
| Bottles | 12,000 | bottles | 260,000 | bottles |
| Labels | 3 | labels per bottle | 2 | label(s) per bottle |
| Machine setups | 1,000 | setups | 800 | setups |
| Machine hours | 200 | MH | 3,450 | MH |
Additional data from its two production departments follow.
| Department | Driver | Cost | ||
| Mixing department | ||||
| Liquid materials | Gallons | $ | 1,384 | |
| Dry materials | Pounds | 5,904 | ||
| Utilities | Machine hours | 1,460 | ||
| Bottling department | ||||
| Bottles | Units | $ | 163,200 | |
| Labeling | Labels per bottle | 16,680 | ||
| Machine setup | Setups | 27,000 | ||
Required:
1 & 2. Determine the cost of each product line using ABC. What is the cost per bottle for Hi-Voltage and EasySlim?
3. If Hi-Voltage sells for $7.05 per bottle, how much profit does the company earn per bottle of Hi-Voltage that it sells?
4. What is the minimum price that the company should set per bottle of EasySlim?
Transcribed Image Text:Hi-Voltage
Easys
Activity driver
incurred
Overhead
Activity
Expected Costs
Expected Activity
Activity Rate
Activity driver incurred
assigned
Mixing department
Liquid materials
$
1,384
Gallons
Dry materials
5,904
Pounds
Utilities
1,460
Machine hours
Bottling department
Bottles
$
163,200
Bottles
Labeling
16,680
Labels
Machine setup
27,000
Setups
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