Prob 7-25

See attached excel sheet managerial accounting

Problem 7-25 Nancy's Nut House is a processor and distributor of a variety of different nuts. The company buys nuts from aroun world and roasts, seasons, and packages them for resale. Nancy's Nut House currently offers 15 different types o one-pound bags through catalogs and gourmet shops. The company's major cost is that of the raw nuts; however predominantly automated roasting and packing processes consume a substantial amount of manufacturing overh The company uses relatively little direct labor. Some of Nancy's nuts are very popular and sell in large volumes, but a few of the newer types sell in very low sal volumes. Nancy's prices its nuts at cost (including overhead) plus a markup of 40%. If the resulting prices of certa are significantly higher than the market price, adjustments are made. Although the company competes primarily 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 produc 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 company's products follows. Cashews Raw materials Chestnuts $4.20 Direct labor $3.20 0.3 0.3 Nancy's controller believes that the traditional costing system may be providing misleading cost information, so s developed the following analysis of the annual budgeted manufacturing costs. Activity Cost Driver Budgeted Activity Purchasing Purchase orders Material handling Number of setups Quality control Number of batches Roasting Roasting hours 96,100 Seasoning Seasoning hours 33,600 Packaging Packaging hours 26,000 Total manufacturin g overhead cost 11,460 1,800 600 Data regarding the annual production of cashews and chestnuts follow. All raw materials purchased during the pe processed and all nuts produced are sold within the period. Cashews Expected sales Chestnuts 100,000 lbs. 2,000 lbs. Batch size 10,000 lbs. 500 lbs. Setups 3 per batch 3 per batch 2,500 lbs. 50 lbs. 1 hour/100 lbs. 1 hour/100 lbs. 0.5 hour/100 lbs. 0.5 hour/100 lbs. 0.1 hour/100 lbs. 0.1 hour/100 lbs. Purchase order size Roasting time Seasoning time Packaging time Using the current costing system, calculate the cost and selling price of one pound of cashews and one pound of chestnuts. (Round predetermined overhead rate to 0 decimal places, e.g. 25% and final answers to 2 d places, e.g. 15.25.) Cashews Cost Selling Price Calculate ABC rates. Cost Pool Activity Rate $ Purchasing /purchase order $ Material handling /setup $ Quality control /batch $ Roasting /roasting hour Chestnuts $ /lb. $ /lb. $ /lb. $ /lb. $ Seasoning /seasoning hour $ Packaging /packaging hour Using an activity-based costing approach and the information provided, calculate the cost and selling price of one of cashews and one pound of chestnuts. (Round all rates and final answers to 2 decmial places, e.g. 15.2 Cashews Cost Selling Price Chestnuts $ / lb. $ / lb. $ / lb. $ / lb. ompany buys nuts from around the tly offers 15 different types of nuts in that of the raw nuts; however, the mount of manufacturing overhead cost. ewer types sell in very low sales If the resulting prices of certain nuts company competes primarily on the d on the basis of each product's direct ales budget and raw materials the year. Chestnuts leading cost information, so she has Budgeted Cost $1,146,000 1,440,000 300,000 1,922,000 672,000 520,000 $6,000,000 rials purchased during the period are f cashews and one pound of % and final answers to 2 decimal e cost and selling price of one pound decmial places, e.g. 15.25.)