Hercules Hair Restorer Inc. (HHRI) makes many varieties of hair restoration products which are sold under well-known marketing labels. A single batch contains 10,000 8-oz. bottles and takes two days to make. Typically 15 batches are completed per month, for different brands. Basic cost data for the month of January appears below.

HHRI appoints a new CEO, who decides to increase production targets to 200 batches per year. She also hires a management accountant who decides to apply fixed overhead based on normal capacity and does some research into cost behavior. Basic product data still applies. New information appears below.

The new CEO has decided that 25% of the production target of 200 batches per year will be a new product, whose information appears below.

Please answer the questions below based on the information given above:

These questions are multiple-choice and have only one answer per question.

1. If HHRI uses for overhead allocation a dual rate system, whereby fixed overhead is allocated on the basis of direct labor hours and variable overhead is allocated on the basis of machine hours, which is true? (Do not round your intermediate calculations.)

A. The introduction of the Jove product will not affect the costing of the Zeus product

B. The introduction of the Jove product will cause the rate per labor hour to increase

C. The introduction of the Jove product will cause the rate per machine hour to fall

D. Full cost for the Zeus product will change by less than 2 cents per bottle

E. None of the choices are correct

2. If HHRI makes 204 batches in the planned sales mix, which is true (to nearest $)? (Do not round your intermediate calculations.)

A. Product Jove's total variable costs are $9,092,000

B. Product Jove's total variable costs are $9,273,840

C. Product Jove's total full costs are $9,386,191

D. Product Jove's total full costs are $9,388,163

E. None of the choices are correct

Batch Hair by Zeus Oil, fl. oz. Lotion, fl. oz. Zeus potion, fl. oz. Alcemena scent Bottle, cap, label Direct labor, hour Machine hours Bottle 2 4 1/4 1/16 Cost per $ 3 $ 1 $ 24 $ 48 $0.4 $ 14 January's other expenses Supervision Indirect materials Equipment deprec & repairs Plant manager's salary Utilities $ 8,000 $ 2,200 $14,520 $ 6,500 $ 1,800 $33,020 1 50 8 % fixed 100 60 Estimated overhead for year Supervision Indirect materials Equipment depreciation Equipment repairs Plant manager's salary Utilities 100 $ 96,000 $ 30,800 $126,240 $ 48,000 $ 84,500 $ 27,000 $412,540 30 100 20 Hair by Jove (new product) Qty per Qty per Bottle Batch Oil, fl. oz. 1% Lotion, fl. oz. 3 Jove potion, fl. oz. 1/8 Hera scent 1/8 Bottle, cap, label 1 Direct labor, hour 60 Machine hours 6 Unit Cost $ 3.00 $ 0.90 $24.00 $60.00 $ 0.40 $14.00