Question

Required information [The following information applies to the questions displayed below.] 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 $ 4,700 Machine hours 2,800 Cooking 15,600 Machine hours 2,800 Product testing 114,400 Batches 650 $ 134,700 Department 2 Machine calibration $ 345,000 Production runs 750 Labeling 18,000 Cases of output 180,000 Defects 9,000 Cases of output 180,000 $ 372,000 Support Recipe formulation $ 88,000 Focus groups 40 Heat, lights, and water 42,000 Machine hours 2,800 Materials handling 84,000 Container types 8 $ 214,000 Additional production information about its two product lines follows. Extra Fine Family Style Units produced 39,000 cases 141,000 cases Batches 390 batches 260 batches Machine hours 1,200 MH 1,600 MH Focus groups 30 groups 10 groups Container types 4 containers 4 containers Production runs 300 runs 450 runs rev: 06_09_2018_QC_CS-128873 5. If the market price is $14 per case of Extra Fine and $12 per case of Family Style, determine the gross profit per case for each product. (Round your intermediate calculations and final answers to 2 decimal places.)

Answer 1

Ans:

Gross profit of products

Extra fine=10

Family style=8

Working:

Overhead rate calculation:

Total overhead cost = Overhead cost of dept 1+dept 2+support

=(4700+15600+114400)+(345,000+18,000+9000)+(88,000+42,000+84,000)

=134700+372000+214000

=720,700
Total volume = units produced by extra fine and family style

=39000+141000

=180,000

Therefore overhead rate=Total overhead cost/Total volume

=720700/180000

=4.004/case

=4 approx

Since no details given regarding othr cost like direct material or direct labour,Total cost is the overhead cost alone.

Gross profit of products=Selling price - cost/case

Extra fine=14-4=10

Family style=12-4=8