11 Chocolate Bars, Inc. (CBI), manufactures creamy deluxe chocolate candy bars. The firm has developed three distinct products: Almond Dream, Krispy Krackle, and Creamy Crunch CBI is profitable, but management is quite concerned about the profitability of each product and the product costing methods currently employed. In particular, management questions whether the overhead allocation base of direct labor hours accurately reflects the costs incurred during the production process of each product. In reviewing cost reports with the marketing manager, Steve Hoffman, who is the cost accountant, notices that Creamy Crunch appears exceptionally profitable and that Almond Dream appears to be produced at a loss. This surprises both him and the manager, and after much discussion, they are convinced that the cost accounting system is at fault and that Almond Dream is performing very well at the current market price Steve decides to hire Jean Sharpe, a management consultant, to study the firm's cost system over the next month and present her findings and recommendations to senior management. Her objective is to identity and demonstrate how the cost accounting system might be distorting the firm's product costs. Jean begins her study by gathering information and documenting the existing cost accounting system. It is rather simplistic, using a single overhead allocation basedirect labor hours to calculate and apply overhead rates to all products. The rate is calculated by summing variable and fixed overhead costs and then dividing the result by the number of direct labor-hours. The product cost is determined by multiplying the number of direct labor hours required to manufacture the product by the overhead rate and adding this amount to the direct labor and direct material costs. CBI engages in two distinct production processes for each product Process 1 is labor intensive, using a high proportion of direct materials and labor Process 2 uses special packing equipment that wraps each individual candy bar and then packs it into a box of 24 bars. The boxes are then packaged into cases, each of which has six boxes. Special packing equipment is used on all three products and has a monthly capacity of 3,000 cases, each containing 144 candy bars 6 bones 24 bars). To illustrate the source of the distortions to senior management, Jean collects the cost data for the three products. Almond Dream, Krispy Krackle, and Creamy Crunch Creamy Almond Drei Krispy Krackle 1.000 $ 9.50 $ 51.0D 0,500 1.0DD $ 3.50 $ 27.00 4,500 Direct labor cost per CANE $ 10.00 $ 6.00 ,0DD Lal overhed 577,000 Total Labor-hour - 14,000 Direct labor costa per hour - $6.0D $ 9.50 3.50 10.90 Costs of products Material 091er CASE Direct labor CORE per case Allocated overhead per case to be computad] Q Search or type URL esc CBI engages in two distinct production processes for each product. Process 1 is labor intensive, using a high proportion of direct materials and labor Process 2 uses special packing equipment that wraps each individual candy bar and then packs it into a box of bars. The boxes are then packaged into cases, each of which has six boxes. Special packing equipment is used on all three product and has a monthly capacity of 3,000 cases, each containing 144 candy bars (6 boxes * 24 bars) To illustrate the source of the distortions to senior management, Jean collects the cost data for the three products, Almond Dream, Krispy Krackle, and Creamy Crunch. Almond Dream Krispy Krackle Creany Crunch 1,000 $ 9.50 $ 51.00 8,500 1.000 $ .50 $ 27.00 4,500 1.000 $ 10.00 6.00 1,000 Product costs Tabar-hours per case Tatal cases produced Material cost per case Direct labor cost per case Labor-hours per product Total overhead - $77.000 Total labor-hours - 14,000 Direct labor costs per hour - $6.00 Allocation rate per labor-how (a). Costs of products Material cost per case Direct labor cost per case Allocated overhead per case(to be computed) Product cost $ 9.50 51.00 $ 3.50 27.00 23.00 $ 10.00 6.00 (e) (1) (yl CBI recently adopted a general policy to discontinue all products whose gross profit margin percentages (Gross margin +Seling price) x 100) were less than 10 percent. By comparing the selling prices to the firm's costs and then calculating the gross margin percentages. Jean could determine which products under the current cost system, should be dropped. The current selling prices of Almond Dream, Krispy Krackle, and Creamy Crunch are $100.00, $6700, and $30.00 per case, respectively. Overhead will remain $77,000 per month under all alternatives Required: a-1. Complete the table under the current cost system, a-2. Determine which products, if any, should be dropped. c-1. Assume that CBI drops the products) Identified in requirement (a) above. Calculate the gross profit margin percentage for the remaining products. Assume that cel can sell all products that it manufactures and that it will use the excess capacity from dropping product to produce more of the most profitable product. c-2. Cel maintains its current rule about dropping products, which additional products, if any, should CBI drop under the existing cos system? d-1. Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate the gross profit margin percentage for the remaining products) and ascertain whether any additional products) should be dropped d-2. Which additional products, if any, should CBI drop under the existing cost system? Complete this question by entering your answers in the tabs below. I REGAL REG AZ Regci neaca Reg Di Reg 02 System: d-1. Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate the gross profit for the remaining product(s) and ascertain whether any additional product(s) should be dropped. d-2. Which additional products, if any, should CBI drop under the existing cost system? Complete this question by entering your answers in the tabs below. Reg A1 Reg AZ Reg Ci Reqc2 Reg D1 Reg D2 Complete the table under the current cost system. (Round your intermediate calculations and final answers to 2 decim places. Negative values should be indicated with a minus sign.) Almond Dream Krispy Krackle Creamy Crunch 8.50 1.00 4.50 1.000 1,000 1,000 $ 9.50 $ 10.00 3.50 27.00 $ $ $ $ Product costs: + Labor-hours per case Total cases produced Material cost per case Direct labor cost per case Labor-hours per product Total overhead Total labor-hours Direct labor costs per hour Allocation rate per labor-hour 51.00 8,500 600 1,000 4,500 $ 77,000 14.000 $ 6.00 $ 5.50 $ $ $ 10.00 9.50 51.00 3.50 27.00 6.00 Costs of products: Material cost per case Direct labor cost per case Allocated overhead percase Productos Seling price Gross profit margin percentage $ 60.50 S 30 50 $ 16.00 % % Reg A2 > esc Q Search or type URL Direct labor costs per hour - $6.00 Allocation rate per labor-hour - (a). Costs of products Material cost per case Direct labor cost per case Allocated overhead per case to be computed) Product cost $ $ 9.50 51.00 (b) 3.50 27.00 $ 10.00 6.00 CBI recently adopted a general policy to discontinue all products whose gross profit margin percentages [(Gross ma price) 100 werdless than 10 percent. By comparing the selling prices to the firm's costs and then calculating the gi percentages, Jean could determine which products, under the current cost system, should be dropped. The current Almond Dream, Krispy Krackle, and Creamy Crunch are $100.00, $67.00, and $30.00 per case, respectively. Overhe $77,000 per month under all alternatives. Required: a-1. Complete the table under the current cost system. a-2. Determine which product(s), if any, should be dropped. C-1. Assume that CBI drops the productis) identified in requirement (a) above. Calculate the gross profit margin percer remaining products. Assume that CBI can sell all products that it manufactures and that it will use the excess capacity product to produce more of the most profitable product. c-2. If CBI maintains its current rule about dropping products, which additional products, if any, should CBI drop under system? d-1. Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate the gross profit marg for the remaining product(s) and ascertain whether any additional product(s) should be dropped. d-2. Which additional products, if any, should CBI drop under the existing cost system? Complete this question by entering your answers in the tabs below. Reg A1 Req A2 Reqc1 Reqcz Reg D1 Reg D2 Determine which product(s), if any, should be dropped. Almond Dream Krispy Krackle Creamy Crunch ReqC1) esc Q Search or type URL Saved ye: d-1. Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate the gross pi for the remaining product(s) and ascertain whether any additional product(s) should be dropped. d-2. Which additional products, if any, should CBI drop under the existing cost system? Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Reg Ci Reg C2 Reg D1 Reg D2 Assume that CBI drops the product(s) identified in requirement (a) above. Calculate the gross profit margin percer the remaining products. Assume that CBI can sell all products that it manufactures and that it will use the excess from dropping a product to produce more of the most profitable product. (Round your intermediate calculations and answers to 2 decimal places.) Direct labor cost per hour Direct labor-hours per caso Total cases produced Labor-hours per product Allocation rate per labor-hour Allocated production costs: Material cost per case Direct labor cost per case Allocated overhead per case Product cost Gross profit margins: Selling price Product cost direct labor allocation base $ 0.00 $ 0.00 Profit margin percentage 0 0 esc a Search or type URL Saved remaining products. Assume that CBI can sell all products that it manufactures and that it will uset product to produce more of the most profitable product. c-2. If CBI maintains its current rule about dropping products, which additional products, if any, sho system? d-1. Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate th for the remaining product(s) and ascertain whether any additional product(s) should be dropped. d-2. Which additional products, if any, should CBI drop under the existing cost system? Complete this question by entering your answers in the tabs below. Req Al Reg A2 Reg Ci ReqC2 Reg D1 Reg D2 Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate the gross percentage for the remaining product(s) and ascertain whether any additional product(s) should be drop intermediate calculations and final answers to 2 decimal places.) Direct labor cost per hour Direct labor hours per case Total cases produced Labor hours per product Allocation rate per labor-hour. Allocated Production Costs: Material cost per case Direct labor cost per case Allocated overhead per case Product cost Gross profit margins: Selling price Product cost-direct labor allocation base 0.00 0.00 Profit margin percentage Prey 1 of 1 !!! 11 Chocolate Bars, Inc. (CBI), manufactures creamy deluxe chocolate candy bars. The firm has developed three distinct products: Almond Dream, Krispy Krackle, and Creamy Crunch CBI is profitable, but management is quite concerned about the profitability of each product and the product costing methods currently employed. In particular, management questions whether the overhead allocation base of direct labor hours accurately reflects the costs incurred during the production process of each product. In reviewing cost reports with the marketing manager, Steve Hoffman, who is the cost accountant, notices that Creamy Crunch appears exceptionally profitable and that Almond Dream appears to be produced at a loss. This surprises both him and the manager, and after much discussion, they are convinced that the cost accounting system is at fault and that Almond Dream is performing very well at the current market price Steve decides to hire Jean Sharpe, a management consultant, to study the firm's cost system over the next month and present her findings and recommendations to senior management. Her objective is to identity and demonstrate how the cost accounting system might be distorting the firm's product costs. Jean begins her study by gathering information and documenting the existing cost accounting system. It is rather simplistic, using a single overhead allocation basedirect labor hours to calculate and apply overhead rates to all products. The rate is calculated by summing variable and fixed overhead costs and then dividing the result by the number of direct labor-hours. The product cost is determined by multiplying the number of direct labor hours required to manufacture the product by the overhead rate and adding this amount to the direct labor and direct material costs. CBI engages in two distinct production processes for each product Process 1 is labor intensive, using a high proportion of direct materials and labor Process 2 uses special packing equipment that wraps each individual candy bar and then packs it into a box of 24 bars. The boxes are then packaged into cases, each of which has six boxes. Special packing equipment is used on all three products and has a monthly capacity of 3,000 cases, each containing 144 candy bars 6 bones 24 bars). To illustrate the source of the distortions to senior management, Jean collects the cost data for the three products. Almond Dream, Krispy Krackle, and Creamy Crunch Creamy Almond Drei Krispy Krackle 1.000 $ 9.50 $ 51.0D 0,500 1.0DD $ 3.50 $ 27.00 4,500 Direct labor cost per CANE $ 10.00 $ 6.00 ,0DD Lal overhed 577,000 Total Labor-hour - 14,000 Direct labor costa per hour - $6.0D $ 9.50 3.50 10.90 Costs of products Material 091er CASE Direct labor CORE per case Allocated overhead per case to be computad] Q Search or type URL esc CBI engages in two distinct production processes for each product. Process 1 is labor intensive, using a high proportion of direct materials and labor Process 2 uses special packing equipment that wraps each individual candy bar and then packs it into a box of bars. The boxes are then packaged into cases, each of which has six boxes. Special packing equipment is used on all three product and has a monthly capacity of 3,000 cases, each containing 144 candy bars (6 boxes * 24 bars) To illustrate the source of the distortions to senior management, Jean collects the cost data for the three products, Almond Dream, Krispy Krackle, and Creamy Crunch. Almond Dream Krispy Krackle Creany Crunch 1,000 $ 9.50 $ 51.00 8,500 1.000 $ .50 $ 27.00 4,500 1.000 $ 10.00 6.00 1,000 Product costs Tabar-hours per case Tatal cases produced Material cost per case Direct labor cost per case Labor-hours per product Total overhead - $77.000 Total labor-hours - 14,000 Direct labor costs per hour - $6.00 Allocation rate per labor-how (a). Costs of products Material cost per case Direct labor cost per case Allocated overhead per case(to be computed) Product cost $ 9.50 51.00 $ 3.50 27.00 23.00 $ 10.00 6.00 (e) (1) (yl CBI recently adopted a general policy to discontinue all products whose gross profit margin percentages (Gross margin +Seling price) x 100) were less than 10 percent. By comparing the selling prices to the firm's costs and then calculating the gross margin percentages. Jean could determine which products under the current cost system, should be dropped. The current selling prices of Almond Dream, Krispy Krackle, and Creamy Crunch are $100.00, $6700, and $30.00 per case, respectively. Overhead will remain $77,000 per month under all alternatives Required: a-1. Complete the table under the current cost system, a-2. Determine which products, if any, should be dropped. c-1. Assume that CBI drops the products) Identified in requirement (a) above. Calculate the gross profit margin percentage for the remaining products. Assume that cel can sell all products that it manufactures and that it will use the excess capacity from dropping product to produce more of the most profitable product. c-2. Cel maintains its current rule about dropping products, which additional products, if any, should CBI drop under the existing cos system? d-1. Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate the gross profit margin percentage for the remaining products) and ascertain whether any additional products) should be dropped d-2. Which additional products, if any, should CBI drop under the existing cost system? Complete this question by entering your answers in the tabs below. I REGAL REG AZ Regci neaca Reg Di Reg 02 System: d-1. Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate the gross profit for the remaining product(s) and ascertain whether any additional product(s) should be dropped. d-2. Which additional products, if any, should CBI drop under the existing cost system? Complete this question by entering your answers in the tabs below. Reg A1 Reg AZ Reg Ci Reqc2 Reg D1 Reg D2 Complete the table under the current cost system. (Round your intermediate calculations and final answers to 2 decim places. Negative values should be indicated with a minus sign.) Almond Dream Krispy Krackle Creamy Crunch 8.50 1.00 4.50 1.000 1,000 1,000 $ 9.50 $ 10.00 3.50 27.00 $ $ $ $ Product costs: + Labor-hours per case Total cases produced Material cost per case Direct labor cost per case Labor-hours per product Total overhead Total labor-hours Direct labor costs per hour Allocation rate per labor-hour 51.00 8,500 600 1,000 4,500 $ 77,000 14.000 $ 6.00 $ 5.50 $ $ $ 10.00 9.50 51.00 3.50 27.00 6.00 Costs of products: Material cost per case Direct labor cost per case Allocated overhead percase Productos Seling price Gross profit margin percentage $ 60.50 S 30 50 $ 16.00 % % Reg A2 > esc Q Search or type URL Direct labor costs per hour - $6.00 Allocation rate per labor-hour - (a). Costs of products Material cost per case Direct labor cost per case Allocated overhead per case to be computed) Product cost $ $ 9.50 51.00 (b) 3.50 27.00 $ 10.00 6.00 CBI recently adopted a general policy to discontinue all products whose gross profit margin percentages [(Gross ma price) 100 werdless than 10 percent. By comparing the selling prices to the firm's costs and then calculating the gi percentages, Jean could determine which products, under the current cost system, should be dropped. The current Almond Dream, Krispy Krackle, and Creamy Crunch are $100.00, $67.00, and $30.00 per case, respectively. Overhe $77,000 per month under all alternatives. Required: a-1. Complete the table under the current cost system. a-2. Determine which product(s), if any, should be dropped. C-1. Assume that CBI drops the productis) identified in requirement (a) above. Calculate the gross profit margin percer remaining products. Assume that CBI can sell all products that it manufactures and that it will use the excess capacity product to produce more of the most profitable product. c-2. If CBI maintains its current rule about dropping products, which additional products, if any, should CBI drop under system? d-1. Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate the gross profit marg for the remaining product(s) and ascertain whether any additional product(s) should be dropped. d-2. Which additional products, if any, should CBI drop under the existing cost system? Complete this question by entering your answers in the tabs below. Reg A1 Req A2 Reqc1 Reqcz Reg D1 Reg D2 Determine which product(s), if any, should be dropped. Almond Dream Krispy Krackle Creamy Crunch ReqC1) esc Q Search or type URL Saved ye: d-1. Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate the gross pi for the remaining product(s) and ascertain whether any additional product(s) should be dropped. d-2. Which additional products, if any, should CBI drop under the existing cost system? Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Reg Ci Reg C2 Reg D1 Reg D2 Assume that CBI drops the product(s) identified in requirement (a) above. Calculate the gross profit margin percer the remaining products. Assume that CBI can sell all products that it manufactures and that it will use the excess from dropping a product to produce more of the most profitable product. (Round your intermediate calculations and answers to 2 decimal places.) Direct labor cost per hour Direct labor-hours per caso Total cases produced Labor-hours per product Allocation rate per labor-hour Allocated production costs: Material cost per case Direct labor cost per case Allocated overhead per case Product cost Gross profit margins: Selling price Product cost direct labor allocation base $ 0.00 $ 0.00 Profit margin percentage 0 0 esc a Search or type URL Saved remaining products. Assume that CBI can sell all products that it manufactures and that it will uset product to produce more of the most profitable product. c-2. If CBI maintains its current rule about dropping products, which additional products, if any, sho system? d-1. Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate th for the remaining product(s) and ascertain whether any additional product(s) should be dropped. d-2. Which additional products, if any, should CBI drop under the existing cost system? Complete this question by entering your answers in the tabs below. Req Al Reg A2 Reg Ci ReqC2 Reg D1 Reg D2 Assume that CBI drops the products identified in requirements (a) and (c) above. Recalculate the gross percentage for the remaining product(s) and ascertain whether any additional product(s) should be drop intermediate calculations and final answers to 2 decimal places.) Direct labor cost per hour Direct labor hours per case Total cases produced Labor hours per product Allocation rate per labor-hour. Allocated Production Costs: Material cost per case Direct labor cost per case Allocated overhead per case Product cost Gross profit margins: Selling price Product cost-direct labor allocation base 0.00 0.00 Profit margin percentage Prey 1 of 1