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Calgary Nut Factory Ltd. makes two different types of nuts: Cashews and Pistachios. Data regarding the two types of muts is as follows: Product Direct
Calgary Nut Factory Ltd. makes two different types of nuts: Cashews and Pistachios. Data regarding the two types of muts is as follows: Product Direct Labour Hours Annual Production Total Direct Labour Hours Cashews Pistachios 4 hours per Kg. 6 hours per Kg. In Kilograms 20,000 15,000 80,000 90,000 A direct labour hour costs $30.00. The Cashews require $36 in direct materials (per Kg) and the pistachios require $45 in direct materials (per Kg). Currently the company uses direct labour hours as its single basis of applying manufacturing overhead. The annual amount of manufacturing overhead is $1,296,000 with $80,000 spent on machine set-ups, $70,000 spent on salting, $15,000 spent on packaging, and the balance spent on other manufacturing overhead. Based on information collected on the consumption of resources on an annual basis (immediately below), the company wishes to determine if the implementation of Activity-Based Costing would be advisable. Activity Activity Measure Cashews Pistachios Total Machine set-ups Salting Number of set-ups Machine Hours 20 30 50 500 1500 2000 Packaging Direct Labour Hours 300 700 1000 Other Direct Labour Hours 37,000 50,000 87,000 REQUIRED: 1) For each type of nut, calculate the manufacturing overhead allocated in total and per unit of production using the current method for allocating manufacturing overhead. (4 Marks) 2) For each type of nut, calculate the manufacturing overhead allocated in total and per unit of production using activity-based costing to allocate manufacturing overhead. (6 Marks) 3) Calculate the total cost per kg for each type of nut using the traditional and the activity based methods. (4 Marks)
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