Question
Idaho Potatoes (IP) grows and processes potatoes in its one plant. It sells potatoes to two markets retail and institutional. The following information is available
Idaho Potatoes (IP) grows and processes potatoes in its one plant. It sells potatoes to two markets retail and institutional. The following information is available after a recent year-end:
|
| Retail | Institutional | Total |
| Pounds of Potatoes | 900,000 | 100,000 | 1,000,000 |
| Direct Material Cost | $135,000 | $15,000 | $150,000 |
| Production Support (overhead) |
|
| $983,000 |
IP currently allocates production support on the basis of pounds of potatoes.
IP recently made a bid to supply 25,000 pounds of potatoes to a college. It wants to add a profit of 20% of the cost in determining the selling price.
Required
| Questions | Answers |
| What is the total budgeted overhead (production support)? |
|
| What is the total budgeted base (how are they allocating overhead)? |
|
| What is the overhead rate? |
|
| What is the amount of overhead allocated to institutional potatoes? |
|
| What is the total cost for institutional potatoes? |
|
| What is the cost per pound for institutional potatoes? |
|
| What is the cost of 25,000 pounds of institutional potatoes? |
|
| What is the selling price of 25,000 pounds of institutional potatoes? |
|
- Allocate the overhead using the proper method
- Calculate the cost of one pound of potatoes for the institutional market
- Calculate the cost of 25,000 pounds of potatoes for the institutional market.
- Calculate the selling price for 25,000 pounds of potatoes for the institutional market.
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