Problem 7-25 Nancy's 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. Nancy's Nut House currently offers 15 different types of nuts in one-pound bags through catalogs and gourmet shops The company's 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. Roasting time Packaging time Using the current costing system, calculate the cost and selling price of one pound of cashews and 1 hour/100 bs. 0.5 hour/100 lbs. 0.5 hour/100 lbs 0.1 hour/100 lbs. 0.1 hour/100 lbs 1 hour/100 lbs. Some of Nancy's nuts are very popular and sell in large volumes, but a few of the newer types sell in very low sales volumes. Nancy's 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 Seasoning time Data for the annual budget include manufacturing ove head of $6,00 allocated on the basis of one po und of chestnuts. Round predetermined overhead rate to O decimal places, eg. 25% each product's direct labor cost. The annual budgeted direct labor cost totals $1,200,000. Based on and Final answers to 2 decimal places,e.g. 15.25 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 Cost Cashews Chestnuts Raw materials Direct labor $4.20 0.30 3.20 0.30 Selling Price Calculate ABC rates. Cost Pool Activity Rate Nancy's controler believes that the traditional costing system may be providing misleading cost information, so she has developed the following analysis of the annual budgeted costs manufacturing Purchasing Material handling Quality control /purchase order /setup Cost Driver Purchase orders Number of setups Number of batches Roasting hours Seasoning hours 11,460 1,800 600 96,100 1,146,000 1,440,000 300,000 1,922,000 672,000 520,000 $6,000,000 Material handling Quality control roasting hour /seasoning hour /packaging hour 26,000 Total manufacturing overhead cost 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, e.g. 15.25) 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 Ib Cost Expected sales Batch size 00,000 Ibs. 10,000 Ibs 3 per batch 2,500 Ibs 2,000 lbs 500 lbs. Selling Price 3 per batch Purchase order size 50 lbs Question Attempts: 0 of 2 used
