Chocolate Bars, Inc. (CBI), manufactures creamy deluxe chocolate candy bars. The firm has developed three distinct products: Almond Dream, Krispy Krackle, and Creamy Crunch. CBI is profitable, but management is quite concerned about the profitability of each product and the product costing methods currently employed. In particular, management questions whether the overhead allocation base of direct labor-hours accurately reflects the costs incurred during the production process of each product. In reviewing cost reports with the marketing manager, Steve Hoffman, who is the cost accountant, notices that Creamy Crunch appears exceptionally profitable and that Almond Dream appears to be produced at a loss. This surprises both him and the manager, and after much discussion, they are convinced that the cost accounting system is at fault and that Almond Dream is performing very well at the current market price. Steve decides to hire Jean Sharpe, a management consultant, to study the firm's cost system over the next month and present her findings and recommendations to senior management. Her objective is to identify and demonstrate how the cost accounting system might be distorting the firm's product costs. Jean begins her study by gathering Information and documenting the existing cost accounting system. It is rather simplistic, using a single overhead allocation basedirect labor-hours-to calculate and apply overhead rates to all products. The rate is calculated by summing variable and fixed overhead costs and then dividing the result by the number of direct labor-hours. The product cost is determined by multiplying the number of direct labor-hours required to manufacture the product by the overhead rate and adding this amount to the direct labor and direct material costs. CBI engages in two distinct production processes for each product. Process 1 is labor Intensive, using a high proportion of direct materials and labor. Process 2 uses special packing equipment that wraps each individual candy bar and then packs it into a box of 24 bars. The boxes are then packaged into cases, each of which has six boxes. Special packing equipment is used on all three products and has a monthly capacity of 3,000 cases, each containing 144 candy bars (= 6 boxes 24 bars). To illustrate the source of the distortions to senior management, Jean collects the cost data for the three products. Almond Dream, Krispy Krackle, and Creamy Crunch. Almond Dream Krispy Krackle Creamy Crunch 8.9 1,889 $9.90 $ 53.40 8,989 4.9 1,000 $ 3.90 $ 29.40 4,900 1.0 1,080 $18.48 $ 6.00 1.ee Product costs Labor-hours per case Total cases produced Material cost per case Direct labor cost per case Labor-hours per product Total overhead = $79, eee Total labor-hours = 14,880 Direct labor costs per hour = $6.00 Allocation rate per labor-hour = (a). Costs of products Material cost per case Direct labor cost per case Allocated overhead per case(to be computed) Product cost $9.99 53.40 (b) (e) $ 3.99 29.40 (C) (f) $ 10.40 6.De (d) (9) CBI recently adopted a general policy to discontinue all products whose gross profit margin percentages [(Gross margin = Selling price) Required: .-1. Complete the table under the current cost system 2-2 Determine which products. If any should be dropped. c-1. Assume that CBI drops the productia identified in requirements above. Calculate the gross profit margin percentage for the remaining products. Assume that CBI can sell all products that it manufactures and that it will use the excess capacity from droppings product to produce more of the most profitable product c-2. If Col maintains its current rule about dropping products, which additional products, if any, should CBI drop under the existing cost system? d-1. Assume that CBI drops the products Identified in requirements (5) and (c) above. Recalculate the gross profit margin percentage for the remaining products and ascertain whether any additional products) should be dropped. d-2. Which additional products, if any.should CBI drop under the exdating cost system Complete this question by entering your answers in the tabs below. RAI PAR Rug C Reca fog : R 02 Determine which product(s), if any, should be dropped. O Almond Dream Okrsey Kracke Creamy Crunch Complete this question by entering your answers in the tabs below. RAI Ray A2 RCI RC2 fog : R2 Assume that cal drops the product(s) identified in requirement (a) above. Calculate the gross profit margin percentage for the remaining products. Assume that I can sell all products that it manufactures and that it will use the excess capacity from dropping a product to produce more of the most profitable product. (Found your intermediate calculations and final answers to 2 decimal places.) Show less Direct labor cost per hour Direct labor-hours per CASA Total cases produced Labor-hours per product Allocation rate por labor-hour. Allocated productions Material cost per caso Direct labor cooper Allocated overhead percase Product cost Gross profit margins Selling price Product cost direct labor allocation base Profit margin percentage Required: -1 Complete the table under the current cost system. .-2 Determine which products, if any, should be dropped. c-1. Assume that Ci drops the products identified in requirement (a) above. Calculate the gross profit margin percentage for the remaining products. Assume that CBI can sell all products that it manufactures and that it will use the excess capacity from droppings product to produce more of the most profitable product c-2. If Col maintains its current rule about dropping products, which additional products, sny, should CBI drop under the existing cost system? d-1. Assume that CBI drops the products Identified in requirements (s) and (c) above. Recalculate the gross profit margin percentage for the remaining products and ascertain whether any aditional products should be dropped. d-2. Which additional products, if any, should I drop under the existing cost system? Complete this question by entering your answers in the tabs below. RA1 Ray A2 CI fag D1 R 02 If cel maintains its current rule about dropping products, which additional products, if any, should I drop under the existing cost system? Almond Dream Krispy Kracke Creamy Crunch Required: .-1. Complete the table under the current cost system. .-2 Determine which products. If any should be dropped. c-1. Assume that Ci drops the products identified in requirement (a) above. Calculate the gross profit margin percentage for the remaining products. Assume that I can sell all products that it manufsctures and that it will use the excess capacity from ciropping product to produce more of the most profitable product c-2. If Col maintains its current rule about dropping products, which additional products, if any, should CBI drop under the existing cost system: d-1. Assume that CBI drops the products identified in requirements (s) and (c) above. Recalculate the gross profit margin percentage for the remaining products and ascertain whether any ditional products should be dropped. d-2 Which additional products, if any, should I droo under the existing costsystem? Complete this question by entering your answers in the tabs below. RA1 RA RCI RC2 fog : Reg 02 Assume that I drops the products identified in requirements (a) and (c) above. Recalculate the gross profit margin percentage for the remaining product(s) and ascertain whether any additional product(s) should be dropped. (Round your intermediate calculations and final answers to 2 decimal places) Direct labor cost per hour Direct labor hours perce Total cases produced Labor hours per product Allocation rate per labor-hour. Allocated Production Costs: Material cost percase Direct labor cost per CASA Allocated overhead percase Product cost Gross profit margins Selling price Product cost-direct labor allocation base Profit margin percentage Required: -1 Complete the table under the current cost system. 2-2 Determine which products. If any should be dropped c-1. Assume that I drops the productia identified in requirement (above. Calculate the gross profit margin percentage for the remaining products. Assume that CBI can sell all products that it manufactures and that it will use the excess capacity from ciroppings product to produce more of the most profitable product c-2. If Col maintains its current rule about dropping products, which additional products, if any, should CBI drop under the existing cost system? d-1. Assume that CBI drops the products Identified in requirements (s) and (c) above. Recalculate the gross profit margin percentage for the remaining products and ascertain whether any additional products) should be dropped. d-2. Which additional products, if any, should I drop under the existing costsystem? Complete this question by entering your answers in the tabs below. RAI RA Rug C Reca fog : R 02 Which additional products, if any, should cal drap under the existing costsystem? O Almond Dream Krispy Kracke Creamy Crunch