Canada Snowcones Ltd. (CSU) owned and operated 20 retail frozen yogurt stores spread throughout Southern Ontario, from Toronita to Windsor CSL's stores sold only high quality premium frozen yogurt. They offered an assortment of 35 different frozen yogurt flavours, A significant amount of the CSL flavours were special such as Peanut Butter Bacon". "Charcoal Sushi, and Tropical Cheese Sensations". However, CSL also sold a few of the classic frozen yogurt flavours, such as vanilla, milk chocolate, mint, and other singular fruit flavours While some of the Navours were very popular, there were also some of the more peculiar flavours that had low tatal sales in terms of units CSL produced its own frozen yogurt. The founder or the company, Samantha Reynolds had originally made the yogurt in her basement But eventual growing demand led to Samantha renting part of factory for CSL's production As CSL grew, Samantha was able to afford automated but more costly production equipment that blended the flavours and packaged the liquid frozen yogurt for freezing CSL'S most significant production costs were for raw materials, particularly yogurt, brown sugar and the special favour ingredients, and for the purchase, operation and maintenance of production equipment All of CSL's products had the same retail price, as customers could choose or combine any flavours by scoops Samantha set the prices to generate, an average, a markup of 100% on average full production costs. CSLS 2019 budget included manufacturing Overhead (MOHS of $450,000. To estimate product casts, Samantha spread this MOH cost to products based on a proportion of the direct labour (DL) costs used in the production process. CSL's total DL costs for 2019 was $200,000, so Samantha charged the overhead to products at a rate of MOH to total DL costs Last week, Laura Horton, Samantha's babysitter for her daughter and the CEO of a large production firm advised that Samantha's pricing strategy was not optimal. Laura's insight was that the expenses for producing CSL's numerous flavours were not uniform. She thought these inconsistencies should be reflected in the prices charged, or CSL s earnings would fluctuate as the combination of flavours Sold varied Laura proposed that Samantha reestimate product costs using activity based costing. She recommended that Samantha identify the major activities whose costs were included in the company's MOH costs. Then she should apply these costs to products based on the products consumption of sach of those activities. In response to Laura's suggestions Samantha prepared the information presented below in Table 1 Samantha decided to hire your consulting firm to help calculate the costs of two demonstrative flavours as an experiment to see if Laura's activity based casting system suggested produced any significant contrasts. She asked Laura to take her best estimate as to where she might find the most material differences, if any existed. After Samantha described the products to her, Laura suggested that she use Peanut Butter Bacon and Chocolate as the test product examples. Table 2 provides data relevant to the two selected products, Tat1 ACRY Paint Marining Canada SoomesBudget MOH COLS Hopted out 000 Dre! 5 60.000 Purchase Order 5 21250 Nother of retum 5 *1.500 Mietre home 511150 Ching 5 12.500 Firmain hours S 13.500 S4 DOO Budgeted Activity level 29 1.75 900 D Pup Quality Control Tute MCHE 100 Tahu Career weg Peanut Button 5130 $ 1.40 1.500 tons 100 1 40 6.000 1.10 100 Chocolate 31.0 per $ 140 10.000 pln 4.000 Die MDM Direct labow Budget Seorach Number of The Order Tini TH Tein pada matina 500 g 02 hour per 100 1.50 tot per 100 250 1 Uning the information above, calculate the full product cast on a per gallon basis of the Peanut Butter Bacon and Chocolate a. Samantha's more traditional costing system b. Laura's suggestion to use activity based costing 2 What are the impacts, if there is any at all, of switching Cuscosting method in particular are the any significant contrasts between traditional costing and activity based costing in terms of Their impact on costs for independent products b. Their effect on Custofal firm income assuming everything else remains the same, such as production and sales prices) if there are sticant contrasts why are the present if there are nofcant contrasts, why are they not present 3 What would you recommend to be Samantha's next step based on this analysis? Explain Canada Snowcones Ltd. (CSU) owned and operated 20 retail frozen yogurt stores spread throughout Southern Ontario, from Toronita to Windsor CSL's stores sold only high quality premium frozen yogurt. They offered an assortment of 35 different frozen yogurt flavours, A significant amount of the CSL flavours were special such as Peanut Butter Bacon". "Charcoal Sushi, and Tropical Cheese Sensations". However, CSL also sold a few of the classic frozen yogurt flavours, such as vanilla, milk chocolate, mint, and other singular fruit flavours While some of the Navours were very popular, there were also some of the more peculiar flavours that had low tatal sales in terms of units CSL produced its own frozen yogurt. The founder or the company, Samantha Reynolds had originally made the yogurt in her basement But eventual growing demand led to Samantha renting part of factory for CSL's production As CSL grew, Samantha was able to afford automated but more costly production equipment that blended the flavours and packaged the liquid frozen yogurt for freezing CSL'S most significant production costs were for raw materials, particularly yogurt, brown sugar and the special favour ingredients, and for the purchase, operation and maintenance of production equipment All of CSL's products had the same retail price, as customers could choose or combine any flavours by scoops Samantha set the prices to generate, an average, a markup of 100% on average full production costs. CSLS 2019 budget included manufacturing Overhead (MOHS of $450,000. To estimate product casts, Samantha spread this MOH cost to products based on a proportion of the direct labour (DL) costs used in the production process. CSL's total DL costs for 2019 was $200,000, so Samantha charged the overhead to products at a rate of MOH to total DL costs Last week, Laura Horton, Samantha's babysitter for her daughter and the CEO of a large production firm advised that Samantha's pricing strategy was not optimal. Laura's insight was that the expenses for producing CSL's numerous flavours were not uniform. She thought these inconsistencies should be reflected in the prices charged, or CSL s earnings would fluctuate as the combination of flavours Sold varied Laura proposed that Samantha reestimate product costs using activity based costing. She recommended that Samantha identify the major activities whose costs were included in the company's MOH costs. Then she should apply these costs to products based on the products consumption of sach of those activities. In response to Laura's suggestions Samantha prepared the information presented below in Table 1 Samantha decided to hire your consulting firm to help calculate the costs of two demonstrative flavours as an experiment to see if Laura's activity based casting system suggested produced any significant contrasts. She asked Laura to take her best estimate as to where she might find the most material differences, if any existed. After Samantha described the products to her, Laura suggested that she use Peanut Butter Bacon and Chocolate as the test product examples. Table 2 provides data relevant to the two selected products, Tat1 ACRY Paint Marining Canada SoomesBudget MOH COLS Hopted out 000 Dre! 5 60.000 Purchase Order 5 21250 Nother of retum 5 *1.500 Mietre home 511150 Ching 5 12.500 Firmain hours S 13.500 S4 DOO Budgeted Activity level 29 1.75 900 D Pup Quality Control Tute MCHE 100 Tahu Career weg Peanut Button 5130 $ 1.40 1.500 tons 100 1 40 6.000 1.10 100 Chocolate 31.0 per $ 140 10.000 pln 4.000 Die MDM Direct labow Budget Seorach Number of The Order Tini TH Tein pada matina 500 g 02 hour per 100 1.50 tot per 100 250 1 Uning the information above, calculate the full product cast on a per gallon basis of the Peanut Butter Bacon and Chocolate a. Samantha's more traditional costing system b. Laura's suggestion to use activity based costing 2 What are the impacts, if there is any at all, of switching Cuscosting method in particular are the any significant contrasts between traditional costing and activity based costing in terms of Their impact on costs for independent products b. Their effect on Custofal firm income assuming everything else remains the same, such as production and sales prices) if there are sticant contrasts why are the present if there are nofcant contrasts, why are they not present 3 What would you recommend to be Samantha's next step based on this analysis? Explain