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What is the ABC manufacturing cost per liter of CoolDay?

a. $1.141

b. $1.548

c. $2.345

d. $2.954

P18-4A 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 LiteMist. LiteMist is sold in 1-liter bottles. Based on recent data, the CoolDay prod- uct has not been as profitable as LiteMist. Management is considering dropping the inex- pensive 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 wasn't until the company started producing the more complicated LiteMist 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 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 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. LiteMist CoolDay $1.20 $0.90 Direct materials per liter Direct labor cost per liter Direct labor hours per liter Total direct labor hours $0.40 $0.50 0.05 150,000 0.09 27,000 Expected Use of Cost Drivers Expected Use of per Product CoolDay Estimated Cost Drivers Activity Cost Pools Grape processing Aging Bottling and corking Labeling and boxing Maintain and Overhead LiteMist Cost Drivers Cart of grapes Total months Number of bottles Number of bottles Number of $145,860 6,600 396,000 6,600,000 3,000,000 6,000 600 3,600,000 270,000 900,000 600,000 300,000 189,000 600,000 900,000 300,000 350 inspect equipment inspections 240,800 800 450 $1,241,660