Question
Nancys Nut House is a processor and distributor of a variety of different nuts. The company buys nuts from around the world and roasts, seasons,
Nancys Nut House is a processor and distributor of a variety of different nuts. The company buys nuts from around the world and roasts, seasons, and packages them for resale. Nancys Nut House currently offers 15 different types of nuts in one-pound bags through catalogs and gourmet shops. The companys major cost is that of the raw nuts; however, the predominantly automated roasting and packing processes consume a substantial amount of manufacturing overhead cost. The company uses relatively little direct labor. Some of Nancys nuts are very popular and sell in large volumes, but a few of the newer types sell in very low sales volumes. Nancys prices its nuts at cost (including overhead) plus a markup of 40%. If the resulting prices of certain nuts are significantly higher than the market price, adjustments are made. Although the company competes primarily on the quality of its products, customers are price conscious. Data for the annual budget include manufacturing overhead of $6,000,000, allocated on the basis of each products direct labor cost. The annual budgeted direct labor cost totals $1,200,000. Based on the sales budget and raw materials standards, purchases and use of raw materials are expected to total $9,000,000 for the year. The unit costs of a one-pound bag of two of the companys products follows.
Raw materials Direct labor Cashews Chestnuts $4.20 $3.20 0.300 .30 Nancy's controller believes that the traditional costing system may be providing misleading cost information, so she has developed the following analysis of the annual budgeted manufacturing costs. Budgeted Cost Activity Purchasing Material handling Quality control Roasting Seasoning Packaging Total manufacturing overhead cost Cost Driver Purchase orders Number of setups Number of batches Roasting hours Seasoning hours Packaging hours Budgeted Activity 11,460 1,800 600 96,100 33,600 26,000 $1,146,000 1,440,000 300,000 1,922,000 672,000 520,000 $6,000,000 Data regarding the annual production of cashews and chestnuts follow. All raw materials purchased during the period are processed and all nuts produced are sold within the period. Expected sales Batch size Setups Purchase order size Roasting time Seasoning time Packaging time Cashews 100,000 lbs. 10,000 lbs. 3 per batch 2,500 lbs. 1 hour/100 lbs. 0.5 hour/100 lbs. 0.1 hour/100 lbs. Chestnuts 2,000 lbs. 500 lbs. 3 per batch 50 lbs. 1 hour/100 lbs. 0.5 hour/100 lbs. 0.1 hour/100 lbs. Using an activity-based costing approach and the information provided, calculate the cost and selling price of one pound of cashews and one pound of chestnuts. (Round all rates and final answers to 2 decmial places, .g. 15.25.) Cashews Chestnuts EEF 15.43|| | 18.30|| Ib. Cost 7.60 25.62|| | Ib. Selling PriceStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started