Required: a. Calculate the product cost for each season with excess capacity costs assigned to season in which it is incurred. b. Calculate the product cost for each season with excess capacity costs assigned to the season requiring it.
Problem 10-66 (Algo) Assigning Capacity Costs: Seasonality (LO 10-6)
Cathy and Tom's Specialty Ice Cream Company operates a small production facility for the local community. The facility has the capacity to make 25,600 gallons of the single flavor, GUI Chewy, annually. The plant has only two customers, Chuck's Gas & Go and Marcee's Drive & Chew DriveThru. Annual orders for Chuck's total 12,800 gallons and annual orders for Marcee's total 6,400 gallons. Variable
The ice cream business has two seasons, summer and winter. Each season lasts exactly six months. Chuck's orders 6,400 gallons in the summer and 6,400 gallons in the winter. Marcee's is closed in the winter and orders all 6,400 gallons in the summer.
Required:
a. Calculate the product cost for each season with excess capacity costs assigned to season in which it is incurred.
b. Calculate the product cost for each season with excess capacity costs assigned to the season requiring it.
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