Question 1 Benton Corporation produces two grades of non-alccholic wine from grapes that it buys from Califonia growers. It produces and sells roughly 3,000,000 liters per ear 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 celled LiteMist. LiteMist is sold in 1-liter bottles. Based on recent data, the CoolDay product has not been as prefitable as LiteMist. Management is considering dropping the inexpensive CoolDay ine so can fecus more attention on the LiteMist product. The LiteMist praduct already demands considerably more attention tan the CoolDuy line lack Eller pre dent and onder o Benton, is ska tical atout this idea. He points out hat or many decades th company produced n y the Co 1 ay in and that it was always quite pronta le t wasn't unt the company started producir he more com li ated Lite ist wine that the profitability of CoolDay declined. Prior to the introduction of LiteMist, the company had basic equipment, simple growing and production procedures, and virtually no need for quality control. Because LiteMist is bottied in1-liter botties, it requires cons derably more time and eTort, both to bottle and to label and box than does Cooloay, The company must bottle and handie 5 times as many bottles of LiteMist to sell the same quantity as CcolDay. CoolDay requires 1 month or aging; LiteMist requires 1 year. CoolDay requires dleaning and inspection of equipment every 10,000 liters: LiteMist requires such maintenance every 600 liters Jack has asked the accounting department to prepere an analysis of the cost per liter using the traditional costing epproach and using activity-based costing. The fellowing infarmation was collected CoolDay LiteMist Direct materials per liter Direct labor cost per liter Direct labar hours per lite Total drect labor hours $0.40 $1.20 $0.50 0.07 180,000 21,000 Expocted 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 insprct equipmentNumber of inspcctions Cart or grapes Total months Number of bottles Number of bottles $146,949 6,500 279,10D 228,600 242,400 6,600,000 3,000,000 3,600,000 50D,000 3D,0n0 300,000 450 900,000 600,000