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$ per 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.

Use the case template on the following tab. Throughout the assignment, use excel formulas that reference the exhibits instead of hard$-$coding values.

$1.$ 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$.$ $$2$ per DL$$).$

$2.$ Next, calculate the cost per gallon of Polynesian Fantasy and Vanilla using the activity$-$based costing method. See hints provided in the spreadsheet.

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

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

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.

$3.$ Lastly, evaluate your findings in the textbox provided. Should Claire switch from the plantwide allocation method to the activity$-$based costing method? Why or why not?