Sara’s Salsa Company produces its condiments in two types: Extra Fine for restaurant customers and Family Style for home use. Salsa is prepared in department 1 and packaged in department 2. The activities, overhead costs, and drivers associated with these two manufacturing processes and the company’s production support activities follow. Process Activity Overhead cost Driver Quantity Department 1 Mixing $ 4,500 Machine hours 1,500 Cooking 11,250 Machine hours 1,500 Product testing 112,500 Batches 600 $ 128,250 Department 2 Machine calibration $ 250,000 Production runs 400 Labeling 12,000 Cases of output 120,000 Defects 6,000 Cases of output 120,000 $ 268,000 Support Recipe formulation $ 90,000 Focus groups 45 Heat, lights, and water 27,000 Machine hours 1,500 Materials handling 65,000 Container types 8 $ 182,000 Additional production information about its two product lines follows. Extra Fine Family Style Units produced 20,000 cases 100,000 cases Batches 200 batches 400 batches Machine hours 500 MH 1,000 MH Focus groups 30 groups 15 groups Container types 5 containers 3 containers Production runs 200 runs 200 runs 4. Using ABC, compute the total cost per case for each product type if the direct labor and direct materials cost is $6 per case of Extra Fine and $5 per case of Family Style. (Round your intermediate calculations to 2 decimal places. Round "Activity Rate" and "Overhead cost per unit" answers to 2 decimal places.)
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Sara’s Salsa Company produces its condiments in two types: Extra Fine for restaurant customers and Family Style for home use. Salsa is prepared in department 1 and packaged in department 2. The activities,
| Process | Activity | Overhead cost | Driver | Quantity | ||
| Department 1 | Mixing | $ | 4,500 | Machine hours | 1,500 | |
| Cooking | 11,250 | Machine hours | 1,500 | |||
| Product testing | 112,500 | Batches | 600 | |||
| $ | 128,250 | |||||
| Department 2 | Machine calibration | $ | 250,000 | Production runs | 400 | |
| Labeling | 12,000 | Cases of output | 120,000 | |||
| Defects | 6,000 | Cases of output | 120,000 | |||
| $ | 268,000 | |||||
| Support | Recipe formulation | $ | 90,000 | Focus groups | 45 | |
| Heat, lights, and water | 27,000 | Machine hours | 1,500 | |||
| Materials handling | 65,000 | Container types | 8 | |||
| $ | 182,000 | |||||
Additional production information about its two product lines follows.
| Extra Fine | Family Style | |||
| Units produced | 20,000 | cases | 100,000 | cases |
| Batches | 200 | batches | 400 | batches |
| Machine hours | 500 | MH | 1,000 | MH |
| Focus groups | 30 | groups | 15 | groups |
| Container types | 5 | containers | 3 | containers |
| Production runs | 200 | runs | 200 | runs |
4. Using ABC, compute the total cost per case for each product type if the direct labor and direct materials cost is $6 per case of Extra Fine and $5 per case of Family Style. (Round your intermediate calculations to 2 decimal places. Round "Activity Rate" and "Overhead cost per unit" answers to 2 decimal places.)
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