Benton Corparation praduces two grades of non-alccholic wine from grapes that it buys from California growers. 1t produces and sells roughly 3,000,000 liters per year of a low-cost, high-vclune product called Cool Day. It sells this in 600,000 5-liter jugs. Benton also produces and sells roughly 300,000 liters per year of a low-volume, high-cost product called LiteMist, LiteMist is sold in 1-iter bottles, Based on recent data, the CoolDay product has not been as profitable as LiteMist. Management is considering dropping the inexpensive CoolDay line so it can focus more attention on the UteMist product. The LiteMist product already demands considerably more attention than the CoolDay line. Jack Eller, presidernt and founder of Bent is skeptical about thhis idea. He points out that for many decades the company produced only the CoulDay line and that it was always quite prolitable. It wasnt until the company started producing the more complicated LiteMist wine that the profitability af CoalDay declined. Prior to the introduction of LiteMist, the campany had basic equipment, simpl qrowing and praduction procedures, and virtually no need for quality control. Because LiteMist is battled in 1-iter bottles, it requires considerably mora time and offort, hath ta hottle and ta label and hox than dons CaolDay. The company must battle and handle 5 times as many battles of LiteMist to sall the sama quantity as CoolDay. CoalDay requires 1 month of aging: LiteMist roquires 1 year. CaolDay requines cleaning and inspection of equipment every 10,00o 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. CoolDay LiteMist Direct materials per liter Direct labor cost per liter Direct labor hours per liter Total drect labor hours $0.40 $0.50 0.04 120,000 51.20 0.90 1.07 21,000 Expected Use of Cost Drivers per Product Expected Use of Cost Drivers Activity Cost Pools Cost Drivers Estimated Overhead CoolDay LiteMist Grape processing Aging Bortding and corking Labeling and boxing Maintain and inspect equipment Cart of grapes Total months Number of hottles Number ef bottles Number of inspectians $147,022 699,600 280,800 214,200 244,80 6,500 600 6,600,000 3,000,000 3,500,000 00,000 900,000 500,000 300,000 900,000 0D,000