Problem 4-4A (Part Level Submission) Benton Corporation produces two grades of non-alcoholic wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high- volume product called CoolDay. It sells this in 600,000 5-liter jugs. Benton also produces and sells roughly 300,000 liters per year of a low-volume, high-cost product called Lite-list. LiteMist is sold in 1-liter bottles. Based on recent data, the CoolDay product has not been as profitable as LiteMist. Management is considering dropping the inexpensive CoolDay line so it can focus more attention on the LiteMist product. The LiteMist product already demands considerably more attention than the CoolDay line Jack Eller, president and founder of Benton, is skeptical about this idea. He points out that for many decades the company produced only the CoolDay line and that it was always quite profitable. It wasnt until the company started producing the more complicated LiteMist wine that the profitability of CoolDay declined. Prior to the introduction of LteMist, the company had basic equipment, simple growing and praduction pracedures, and virtually no need far quality control. Because LiteMist is bottled in 1-liter bottles, it reqires considerably more time and effort, both to bottle and to label and box than does CoolDay. The company must bottle and handle 5 times as many bottles of LiteMist to sell the same quantity as CoolDay. CoolDay requires 1 month of aging: LiteMist requires 1 year, CoolDay requires cleaning and inspection of equipment every 10,000 liters; LiteMist requires such maintenance every 600 liters Jack has asked the accounting department to prepare an analysis of the cost per liter using the traditional costing approach and using activity-based costing. The following information was collected. Direct materials per liter Direct labar cost per liter Direct labor hours per liter Total direct labor hours CoolDay LiteMist $1.20 $0.90 0.10 30,000 $0.40 $0.50 0.07 210,000 Expected Use of Cost Drivers per Product Expected Use of Cost Drivers Activity Cost Pools Cost Drivers Estimated Overhead CoolDay LiteMist Grape processing Aging Bottling and corking Labeling and boxing Maintain and inspect equipment Cart of grapes Total months Number of bottles Number of bottles Number of inspections $146,346 673,200 209,800 222,300 243,200 1,575,046 6,600 6,000 600 6,500,000 3,000,000 3,600,000 300,000 00.000 450 900,000 00.000 Answer each of the following questions Under trad tional product costing using drect labor haurs, compute the total manufacturing cast per liter of both products. (Round aswers to 3 decimal places, e.g. 12.250.) olDa eM Manufacturing cost per liter g Under ABC, prepare a schedule showing the computation af the activity based overhead ratrs. (Round overhead rates to 3 decimal places, e.g. 12.250.) Expected Use of Cost Drivers Activity Cost Pools Overhead Overhead Rates Grape processing Bottling and corking Labeling and boxino Maintain and inspect equipment per cart per month per battle per bottle per inspection Prepare a schedule assigning each activity's overhead cost pool to each product, based on the use of cost drivers. Include a camputation af averhead cost per liter. (Round overhead rale cost per llter to 3 declmal places, e.g. 12.250 and cost assigned to 0 decimal places, e.o. 12,250.) CoolDay Expected Use of Cost Drivers Activity-Based Overhead Rates Expected Use of Cost Drivers Activity-Based Overhead Rates Activity Cost Pool Cost Assigned Cost Assigned Grape processing Aging Bottling and corking Labeling and boxing Maintain and inspect equipment Total costs assigned Liters produced Overhead cost per liter Compute the total manufacturing cost per liter for both products under ABC. (Round overhead cost per liter to 3 decimal places, e.q. 1.225.) LiteMist Manufacturing cost per liter