17 Homework Due Feb 17 Question 5 of 6 -/1 View Policies Current Attempt in Progress Benton Corporation produces two grades of non-alcoholic wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600,000 S-liter jugs. Benton also produces and sells roughly 300,000 liters per year of a low-volume, high-cost product called LiteMist. Lite Mist is sold in 1-liter bottles. Based on recent data, the CoolDay product has not been as profitable as Lite Mist Management is considering dropping the inexpensive CoolDay line so it can focus more attention on the Lite Mist product. The Lite Mist product already demands considerably more attention than the CoolDay line. Jack Eller, president and founder of Benton, is skeptical about this idea. He points out that for many decades the company produced only the CoolDay line and that it was always quite profitable. It wasn't until the company started producing the more complicated Lite Mist wine that the profitability of CoolDay declined. Prior to the introduction of LiteMist the company had basic equipment, simple growing and production procedures, and virtually no need for quality control. Because Lite Mist is bottled in 1-liter bottles, it requires considerably more time and effort, both to bottle and to label and box than does CoolDay, The company must bottle and handle 5 times as many bottles of Lite Mist to sell the same quantity as CoolDay. CoolDay requires 1 month of aging: Lite Mist requires 1 year. CoolDay requires cleaning and inspection of equipment every 10,000 liters: LiteMist requires such maintenance every 600 liters Jack has asked the accounting department to prepare an analysis of the cost per liter using the traditional costing approach and using activity-based costing. The following information was collected. Direct materials per liter Direct labor cost per liter Direct labor hours per liter CoolDay $0.40 $0.50 0.05 DVOR Lite Mist $1.20 $0.90 0,07 17 tv RA w AH ework Due Feb 17 Question 5 of 6 > - 71 using activity based costing. The following information was collectea, Direct materials per liter Direct labor cost per liter Direct labor hours per liter Total direct labor hours CoolDay $0.40 $0.50 0.05 150,000 Lite Mist $1.20 $0.90 0.07 21,000 Estimated Use of Cost Drivers per Product Activity Cost Pools Grape processing Aging Bottling and corking Labeling and boxing Maintain and inspect equipment Cost Drivers Cart of grapes Total months Number of bottles Number of bottles Number of inspections Estimated Overhead $146,672 574,200 280,800 198,900 Estimated Use of Cost Drivers 6,600 6,600,000 900.000 900.000 CoolDay 6,000 3.000.000 600,000 600,000 Lite Mist 600 3,600,000 300,000 300,000 244,800 800 350 450 $1,445,372 Answer each of the following questions. AM W ty 17 assessment education WC NWB Ament Player Application Chapter 17 Homework Due Fan omework Due Feb 17 > Question 5 of 6 $ Under ABC. prepare a schedule showing the computation of the activity-based overhead rates (per coser) (Round overhead rates to 3 decimal places, e.g. 12.250.) Activity Cost Estimated Estimated Use Activity-Based Pools Overhead of Cost Drivers Overhead Rates Grape $ $ per cart processing per Aging month Bottling and 1 corking Labeling and $ boxing Maintain and per inspect $ inspection equipment $ $ per bottle $ per bottle eTextbook and Media Penareschedulessioning each activis overhead costunelenchiamaddalhased on the senticostuddivers Include 17 Homework Due Feb 17 Question 5 of 6 Prepare a schedule assigning each activity's overhead cost pool to each product, based on the computation of overhead cost per liter. (Round overhead rate, cost per liter to 3 decimal plac assigned to 0 decimal places. e.3. 12.250.) drivers. Include a 12.250 and cost Estimated Use of Cost Drivers CoolDay Activity-Based Overhead Rates Cost Assigned Activity Cost Pool Grape processing $ $ Aging $ $ $ $ Bottling and corking Labeling and boxing Maintain and inspect equipment Overhead costs assigned Liters produced Overhead cost per liter $ eTextbook and Media X W