Case $1-$ Glaze Ice Cream Factory

For this case, review your lecture notes on Job Costing and Activity Based Costing

Glaze is a regional ice cream chain in the Midwest that produces its own ice cream. Glaze creates high$-$quality, premium ice cream. They produce classic ice cream flavors $($like vanilla and chocolate$)$ as well as some exotic ice cream flavors like "Polynesian Fantasy" or "Mango Lemon Supreme".

Glaze began as a small operation, founded by Claire Bosley. As Glaze grew, Claire decided to rent a building for production and has since been able to afford more expensive, automated manufacturing equipment. Glaze's most significant production costs are for the raw materials $($like cream or sugar$)$ and for the operation and maintenance of the production equipment.

All of Glaze's products are sold at the same retail price, which is approximately a markup of $100\%$ on production costs. Currently, Claire uses the plantwide allocation method to estimate product costs of each ice cream. Her plantwide manufacturing overhead rate is $200\%$ of direct labor costs $($i$.$e$.$ $$2/$DL$$).$

Although Claire is an expert in ice cream, she has much less experience in accounting. Claire hired you to take a look at her current costing system to make sure she was pricing her product well. Claire prepared a few exhibits for you to use in your analysis $($found in the excel spreadsheet$).$ In Exhibit $1,$ Claire lists out the budgeted manufacturing overhead costs. In Exhibit $2,$ Claire provides detailed information on the production of the "Polynesian Fantasy" and "Vanilla" flavors.

Download the case template from Blackboard to get started. Throughout the assignment, use excel formulas that reference the exhibits instead of hard$-$coding values.

In the PINK cells, Calculate the cost per gallon of Polynesian Fantasy and Vanilla using the plantwide allocation method using the MOH rate of $200\%$ of direct labor costs $($i$.$e$.$ $$2/$DL$$).$

Next, calculate the cost per gallon of Polynesian Fantasy and Vanilla using the activitybased costing method. See hints provided in the spreadsheet.

a$.$ Step $1$: First compute the MOH Rates for each activity in the YELLOW cells.

b$.$ Step $2$: Compute the Actual Basis Used in the PURPLE cells. See the hints provided in the template.

c$.$ Step $3$: Using your computations in steps $1$ and $2,$ calculate the MOH Allocated for each activity and the Total Cost per Gallon in the BLUE cells.

Spring $2024-$ Copyright $($C$)$ M$.$ Martin, Department of Accounting, UIC