Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Bronson Shrimp Case Study Analysis Activity-based costing. Please answer Question #2 in an EXCEL SPREADSHEET so that I may see how you got your solutions.

Bronson Shrimp Case Study Analysis Activity-based costing. Please answer Question #2 in an EXCEL SPREADSHEET so that I may see how you got your solutions. I think you have to answer #1 to answer #2???

Bronson recently submitted bids for two orders: (1) headless shrimp for a cruise line and (2) peeled and deveined shrimp for a restaurant chain. Bronson won the first bid but lost the second. The production and sales managers are upset. They believe that Bronsons state-of-the-art equipment should have given the company an edge in the peeled and deveined market. Consequently, production managers are starting to keep their own sets of product cost records.

Bronson is reexamining both its production process and its costing system. The existing costing system has been in place since 1991. It allocates all indirect costs based on direct labor hours. Bronson is considering adopting activity-based costing. Controller Heather Barefield and a team of production managers performed a preliminary study. The team identified six activities, with the following (department-wide) estimated indirect costs and cost drivers for 2014:

Activity

Estimated Total Cost of Activity

Allocation Base

Redesign of production process (costs of changing process and equipment)..............

$ 5,000

Number of design changes

Production scheduling (production schedulers salary).........................................

6,000

Number of batches

Chilling (depreciation on refrigerators)...............................

1,500

Weight (in pounds)

Processing (utilities and depreciation on equipment)........

19,200

Number of cuts

Packaging (indirect labor and depreciation on equipment)........

1,425

Cubic feet of surface exposed

Order filling (order-takers and shipping clerks wages)...............

7,000

Number of orders

Total indirect costs for the entire department.................................

$40,125

The raw shrimp are chilled and then cut. For headless shrimp, employees remove the heads, then rinse the shrimp. For peeled and deveined shrimp, the headless shrimp are further processedthe shells are removed and the backs are slit for deveining. Both headless shrimp and peeled and deveined shrimp are packaged in foam trays and covered with shrink wrap. Order-filling personnel assemble orders of headless shrimp as well as peeled and deveined shrimp.

Barefield estimates that Bronson will produce 10,000 packages of headless shrimp and 50,000 packages of peeled and deveined shrimp in 2014. The two products incur the following costs and activities per package:

Costs and Activities per Package

Headless Shrimp

Peeled and Deveined Shrimp

Shrimp.....................................

$3.50

$4.50

Foam trays ...............................

$0.05

$0.05

Shrink wrap .............................

$0.05

$0.02

Number of cuts ........................

1 cut

3 cuts

Cubic feet of exposed surface...

1 cubic foot

0.75 cubic foot

Weight (in pounds)...................

2.5 pounds

1 pound

Direct labor hours....................

0.01 hour

0.05 hour

Bronson pays direct laborers $20 per hour. Barefield estimates that each product line also will require the following total resources:

Headless Shrimp

Peepled and Deveined Shrimp

Design changes

1 change

for all 10,000 packages

4 changes

for all 50,000 packages

Batches

40 batches

20 batches

Sales orders

90 orders

110 orders

Requirements

Form groups of four students. All group members should work together to develop the groups answers to the three requirements.

1. Using the original costing system with the single indirect cost allocation base (direct labor hours), compute the total budgeted cost per package for the headless shrimp and then for the peeled and deveined shrimp. (Hint: First, compute the indirect cost allocation rate that is, the predetermined overhead rate. Then, compute the total budgeted cost per package for each product.)

2. Use activity-based costing to recompute the total budgeted cost per package for the headless shrimp and then for the peeled and deveined shrimp. (Hint: First, calculate the budgeted cost allocation rate for each activity. Then, calculate the total indirect costs of (a) the entire headless shrimp product line and (b) the entire peeled and deveined shrimp product line. Next, compute the indirect cost per package of each product. Finally, calculate the total cost per package of each product.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Deadly Audit A Buckeye Barrister Mystery

Authors: David M Selcer

1st Edition

0988194368, 978-0988194366

More Books

Students also viewed these Accounting questions