Multiple Cost Drivers

Newman's Own manufactures a variety of specialty salad dressings. Production runs are both high-volume and low-volume activities, depending on customer orders. Assume the following represents general manufacturing costs (manufacturing overhead) and each cost's related activity cost driver for Newman's Own.

Multiple Cost Drivers Newman's Own manufactures a variety of specialty salad dressings. Production runs are both high-volume and low-volume activities, depending on customer orders. Assume the following represents general manufacturing costs (manufacturing overhead) and each cost's related activity cost driver for Newman's Own. Level Total Cost Units ofCost Driver Unit $ 600,000 20,000 machine hours Batch 40,000 400 customer orders Product 84,000 15 products The lime vinaigrette dressing required 1,000 machine hours to fill 60 customer orders for a total of 4,000 cases. Note: Do not use negative signs with any of your answers. (a) Assuming all manufacturing overhead is estimated and predicted on the basis of machine hours, determine the predicted total overhead costs to produce the 4,000 cases of lime vinaigrette. $ 1 X (b) Assuming manufacturing overhead is estimated and predicted using separate rates for machine hours, customer orders, and products (a multiple-level cost hierarchy), determine the predicted total overhead costs to produce the 4,000 cases of lime vinaigrette. $ 334 X (c) Calculate the error in predicting manufacturing overhead using machine hours versus using multiple cost drivers. Indicate whether the use of only machine hours results in overpredicting or underpredicting the costs to produce 4,000 cases of lime vinaigrette. $ 89 x Under-prediction + v (d) Looking just at batch level costs, calculate the error in predicting those costs using machine hours versus using customer orders. Indicate whether the use of only machine hours results in overpredicting or underpredicting the batch-level costs to produce 4,000 cases of lime vinaigrette. $ 700 X Under-prediction +(e) Looking just at product-level costs, calculate the error in predicting those costs using machine hours versus using number of products. Indicate whether the use of only machine hours results in overpredicting or underpredicting the product-level costs to produce 4,000 cases of lime vinaigrette. $ 459 X Under-prediction