Opaskwayak Inc. bottles pure spring water from lakes in northern Manitoba. The lakes are on First Nations property, and the band is the majority shareholder in the company. The only cost for the water is the cost of transportation and purification. The company is very careful not to overtax the water systems when it takes water. It also ensures sustainability for the land. Opaskwayak currently produces three different products from the spring water: still water, carbonated water, and a cranberry-flavoured carbonated version. The process for creating the various products is as follows: All products start with the piping of the water to the bottling plant. At the plant, the water undergoes a thorough distillation process. 1% of the volume is lost in the distillation process. For still water, the water is bottled at this point. For carbonated water, the water goes from this split-off point to the Carbonation department. After carbonation, a percentage of the product is bottled, and the remainder is moved to the Fruit department. In the Fruit department, the cranberries are sorted, juiced, and boiled into a syrup. The syrup is added to the carbonated water, and the final product is bottled.

The following information was reported for the most recent period:

Department

Transportation

Purification

Carbonation

Fruit

Bottling

Direct materials

$1,029,500

$320,760

$130,680

Direct labour

$87,500

$75,750

$145,000

$180,000

$218,400

Planned manufacturing overhead

$1,657,250

$560,000

$675,850

$356,000

$6,800,000

Actual manufacturing overhead

$1,754,235

$485,000

$669,880

$376,128

$6,875,000

Planned machine hours

26,200

8,800

20,000

20,000

2,496

Actual machine hours

26,208

8,850

19,500

20,100

2,496

Planned direct labour hours

5,250

5,050

10,000

12,000

10,000

Actual direct labour hours

5,650

5,000

10,050

11,990

12,000

Volume in litres

120,000,000

118,800,000

41,580,000

5,940,000

118,800,000

In the current period the following production occurred:

60% of the purified volume was bottled as still water.

35% of the purified volume was bottled as carbonated water, and the remainder was bottled as cranberry-flavoured carbonated water.

Intermediate Management Accounting Project 1

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The price of the products is as follows:

Still water $0.20 per litre

Carbonated water $0.23 per litre

Cranberry-flavoured carbonated water $0.50 per litre

Direct labour hours is the cost driver in the Transportation and Purification departments. All other departments are driven by machine hours.

In the Fruit department, the accountant has analyzed the activities and has arrived at the following:

Activity

Cost

Driver

Volume

Cost per unit

Washing

$ 24,175

Kg of fruit

3,000,000

$0.0081

Sorting

115,000

Kg of fruit

3,000,000

0.0383

Juicing

116,150

Kg of fruit

2,950,000

0.0394

Boiling

100,675

Litres of juice

5,900,000

0.0171

For the last batch of the year, Opaskwayak processed 1,000,000 pre-purification litres with the following direct labour hours and machine hours:

Department

Direct labour hours

Machine hours

Transportation

50

221

Purification

28

75

Carbonation

95

192

Fruit

100

167

Bottling

85

20

Processing this final batch took 2,500 kilograms of cranberries, of which 2,458 kilograms remained after sorting. This produced 4,916 litres of juice. Bottling costs are allocated on the basis of volume processed. Assume that $24,520 in direct materials is added in Carbonation, $2,675 in Fruit, and $1,090 in Bottling.

Required:

a) Compute each department's manufacturing overhead rate, assuming that Opaskwayak uses a normal department rate based on the planned manufacturing overhead. (2.5 marks)

b) Calculate the total joint costs for the last batch of the year using the manufacturing overhead rates calculated in part (a). (4 marks)

c) Calculate the cost of bottling and carbonating the water and adding the fruit syrup for the last batch of the year based on the manufacturing overhead rates calculated in part (a). (4.5 marks)

d) Determine how much of each product was produced in the final batch based on the current production breakdown. (1 mark)