Question

Kate’s Kale Chips produces a healthy snack made primarily of kale. Each bag of the product...

Kate’s Kale Chips produces a healthy snack made primarily of kale. Each bag of the product sells for $5. The company computes the manufacturing overhead rate on a quarterly basis based upon the planned number of units to be produced that quarter. The following data are from the projections of Kate’s Kale Chips for the upcoming quarter:

Projections
Sales 27,000 bags
Production 29,000 bags
Variable manufacturing cost per bag $ 3.40
Sales and distribution costs per bag $ 0.35
Total fixed manufacturing overhead $ 49,300
Fixed administrative overhead $ 25,000

Required:

1. Compute the projected product cost per bag produced under full costing.

2. Compute the projected product cost per bag under variable costing.

Business   Accounting   
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Homework Answers

Answer #1

Answer :-

1. Computation of the projected product cost per bag produced under full costing :-

Product cost per bag = Variable manufacturing cost per bag + Fixed manufacturing cost per bag

Product cost per bag = $3.40 + ( $49,300 / 29,000)

Product cost per bag = $3.40 + $1.7

Product cost per bag = $5.10

2. Computation of projected product cost per bag under variable costing:-

Product cost per bag = Variable manufacturing cost per bag

Product cost per bag = $3.40

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