Muffmtop Company makes two models of snack cake, the poppyseed and the blueberry.

Basic production information follows:

Muffintop has monthly overhead of $135,000, which is divided into the following cost pools:

The company has also compiled the following information about the chosen cost drivers:

Required:

1. Suppose Muffintop used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.

2. Calculate the production cost per unit for each of Muffintop’s products under a traditional costing system.

3. Calculate Muffintop’s gross margin per unit for each product under the traditional costing system.

4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Muffintop wanted to implement an ABC system.

5. Assuming an ABC system, assign overhead costs to each product based on activity demands.

6. Calculate the production cost per unit for each of Muffintop’s products with an ABC system.

7. Calculate Muffintop’s gross margin per unit for each product under an ABC system.

8. Compare the gross margin of each product under the traditional system and ABC.

Transcribed Image Text:

Poppyseed Blueberry Direct materials cost per unit $0.75 $0.85 Direct labor cost per unit $0.25 $0.25 Sales price per unit $2.50 $2.50 Expected production per month 140,000 units 190,00 units