PROBLEM #4 Spicy Salsa Company produces its condiments in two types: Extra Fine for restaurant customers and Family Style for home use. Salsa is prepared in department 1 and packaged in department 2. The activities, overhead costs, and drivers associated with these two manufacturing processes and its production support activities follow. Process Activity Overhead Cost (8) Driver Quantity Department 1 Mixing 4.500 Machine hours 1,500 Cooking 11250 Machine hours 1,500 Product Testing 112,500 Batches 600 128 250 Department 2 Machine calibration Labeling Defects 250,000 Production runs 400 12.000 Cases of output 120,000 6,000 Cases of output 120,000 268,000 8 Support Recipe formulation 90,000 Focus groups Heat, lights, and water 27,000 Machine hours 1,500 Materials handling 65,000 Container types 182,000 Additional production information about its two product lines follows. Family Style Units produced 20,000 cases 100,000 cases Batches 200 batches 400 batches Machine hours 500 MH 1,000 MH Focus groups 30 groups 15 groups Container types 5 containers 3 containers Production runs 200 runs 200 runs Extra Fine Required 1. Using a plantwide overhead rate based on cases, compute the overhead cost that is assigned to each case of Extra Fine Salsa and each case of Family Style Salsa. 2. Using the plantwide overhead rate, determine the total cost per unit for the two products if the combined direct materials and direct labor cost is $6 per case of Extra Fine and $5 per case of Family Style. 3. If the market price of Extra Fine Salsa is $18 per case and the market price of Family Style Salsa is $9 per case, determine the gross profit per case for each product. What might management conclude about each product line? 4. Using ABC, compute the total cost per case for each product type if the combined direct labor and direct materials cost is $6 per case of Extra Fine and $5 per case of Family Style. 5. If the market price is $18 per case of Extra Fine and $9 per case of Family Style, determine the gross profit per case for each product. How should management interpret the market prices given your computations