Required information Problem 17-5A Pricing analysis with ABC and a plantwide overhead rate LO A1, A2, P1, P3 (The following information applies to the questions displayed below.) Sara's 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 the company's production support activities follow. Process Department 1 Activity Mixing Cooking Product testing Quantity 1,400 1,400 1,000 Department 2 Machine calibration Labeling Defects Overhead cost Driver $ 5,000 Machine hours 10,400 Machine hours 113,000 Batches $ 128, 400 $ 275,000 Production runs 14,500 Cases of output 6,500 Cases of output $ 296,000 $ 95,000 Focus groups 28,000 Machine hours 70,000 Container types $ 193,000 500 140,000 140,000 Support Recipe formulation Heat, lights, and water Materials handling 40 1,400 8 Additional production information about its two product lines follows. Units produced Batches Machine hours Focus groups Container types Production runs Extra Fine 25,000 cases 250 batches 500 MH 27 groups 4 containers 250 runs Family Style 115,000 cases 750 batches 900 MH 13 groups 4 containers 250 runs Problem 17-5A Parts 1, 2 & 3 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 case for the two products if the direct materials and direct labor cost is $8 per case of Extra Fine and $7 per case of Family Style. 3.a. If the market price of Extra Fine Salsa is $17 per case and the market price of Family Style Salsa is $10 per case, determine the gross profit per case for each product. 3.b. What might management conclude about the Family Style Salsa product line? Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req Req 3B 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. (Round your intermediate calculations and final answers to 2 decimal places.) Plantwide overhead rate per case 4. Using ABC, compute the total cost per case for each product type if the direct labor and direct materials cost is $8 per case of Extra Fine and $7 per case of Family Style. (Round your intermediate calculations to 2 decimal places. Round "Activity Rate" and "Overhead cost per unit" answers to 2 decimal places.) Extra fine Activity Overhead Cost Activity Drivers Activity Rate Activity Drivers Overhead assigned Mixing & Cooking Product testing Machine calibration Labeling & Defects Recipe formulation Heat, light and water Material handling Total overhead costs assigned Extra fine Family Style Family Style Activity Drivers Overhead assigned 5. If the market price is $17 per case of Extra Fine and $10 per case of Family Style, determine the gross profit per case for each product. (Round your intermediate calculations and final answers to 2 decimal places.) Extra Fine Family Style
