Question 11 of 12 > -/1 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 Mist. Lite Mist is sold in 1-liter bottles. Based on recent data, the CoolDay product has not been as profitable as Lite Mist. Management is considering dropping the inexpensive CoolDayline so it can focus more attention on the Lite Mist product. The Lite Mist 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 wasn't until the company started producing the more complicated Lite Mist wine that the profitability of CoolDay declined. Prior to the introduction of Lite Mist, the company had basic equipment, simple growing and production procedures, and virtually no need for quality control. Because Lite Mist is bottled in 1-liter bottles.it requires 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 Lite Mist to sell the same quantity as CoolDay CoolDay requires 1 Month of apingLite Mist requires Iyear. CoolDay requires cleaning and inspection of equipment every 10.000 liters, Lite Mist 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 CoolDay Lite Mist Direct materials per liter $0.40 $1.20 Direct labor cost per liter SO SO $0.90 Direct labor hours per liter 0.04 0.07 Total direct labor hours 120,000 21.000 Estimated Use of Cost Drivers per Product Activity Cost Pools Grape processing Aging Cost Drivers Cart of Tor months Number of bottles Number of boties Nuno inspection Estimated Use of Cost Drivers 5,600 600.000 900,000 900.000 800 Estimated Overhead $106.520 463000 279.000 190.000 241.600 $137120 Bottling and cold and bone Maintain and inspect CoolDay 6.000 3.000.000 600.000 800.000 350 UM 600 2.000.000 300.000 300 OOO F3 TS & $ 4. 3 5 8 0 Question 11 of 12 Answer each of the following questions. Under traditional product casting using direct labor hours.compute the total manufacturing cost per liter of both products (Round answers to 3 decimal places, s. 12.250.) CoolDay Lite Mist Manufacturing cost per liter e Textbook and Media Under ABC, prepare a schedule showing the computation of the activity-based overhead rates per cost driver) (Round overhead rates to 3 decimal places, s. 12.250.) Activity Cost Pools Estimated Overhead Estimated Use of Cost Drivers Activity Based Overhead Rates Grape $ $ per cart $ per month per bottle processing Aging Botting and cording Labeling and boxing Maintain and inspect moment $ per bottle $ per Inspection eTextbook and Media Question 11 of 12 > -/1 Prepare a schedule assigning exch activity's overhead cost pool to each product based on the use of cost drivers. Include a computation of overhead cost per liter. Round overhead rute.cont perilter to 3 decimal places, es 12.250 and cost assigned to o decimal places, s. 12.250 Estimated Use of Cost Drivers CoolDay Activity-Based Overhead Rates Activity Cost Pool Grape processing Aging Cost Assigned $ 5 Bottling and corking $ Labeling and boxing S Maintain and inspect equipment $ Overhead costs assigned Utiers produced Overhead cost per liter $ Textbook and Media Compute the total manufacturing cost per liter for both products under ABC Round overhead cost perete decimales 1225) Cooly List Manfacturing cost per 3 eTextbook and Media 20 , % 5 & 4 6 8
