Question 1.1 Bichette Soda Company operates many bottling plants around the globe. At its Mississauga plant, where nine different brands are bottled, the following costs were incurred in the current year to produce 15,000,000 cans of soft drink: Development costs of adding the new product "Pop Plus" amounted to $614,000. Material handling costs of inspecting and handling concentrate, bottles, packages, and so forth amounted to $433,500. These costs are allocated to each production run. Incoming materials purchase costs that can be directly traced to individual products being canned and packaged. These costs are purely variable with output level and amounted to $2,213,000. Executive salaries and other central administration overhead amounted to $423,000. Plant overhead including costs related to: supervision, safety, energy and plant insurance amounted to $623,000. The cost of cleaning and calibrating equipment for each production run amounted to $171,500. Required Classify each of the preceding costs as output unit-level, batch-level, product-sustaining, or facility-sustaining. Compute the cost per unit for the total manufacturing cost.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

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Question 1.1

Bichette Soda Company operates many bottling plants around the globe. At its Mississauga plant, where nine different brands are bottled, the following costs were incurred in the current year to produce 15,000,000 cans of soft drink:

Development costs of adding the new product "Pop Plus" amounted to $614,000.
Material handling costs of inspecting and handling concentrate, bottles, packages, and so forth amounted to $433,500. These costs are allocated to each production run.
Incoming materials purchase costs that can be directly traced to individual products being canned and packaged. These costs are purely variable with output level and amounted to $2,213,000.
Executive salaries and other central administration overhead amounted to $423,000.
Plant overhead including costs related to: supervision, safety, energy and plant insurance amounted to $623,000.
The cost of cleaning and calibrating equipment for each production run amounted to $171,500.

Required

Classify each of the preceding costs as output unit-level, batch-level, product-sustaining, or facility-sustaining.
Compute the cost per unit for the total manufacturing cost.

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