See the reference sheet for details of this problem. Assume total production cost of the Holiday Baskets is $465,000. What is the target price for a single Holiday Basket given RGB s pricing policy? Round to the nearest $0.01 17. You will need to refer to the information provided on this data sheet in order to answer the questions asked in the quiz (I suggest you have a copy of the data sheet accessible when you take the quiz). You may find it helpful to use the data sheet to prepare for the quiz. Ready Gift Baskets (RGB) produces gourmet gift baskets that it distributes online as well as from its small retail store. Most of the items included in the gift baskets are purchased from suppliers pre-packaged and ready to add to the baskets. Some specialty items are purchased in bulk and require additional preparation before they can be included. RGB does not track the direct costs for items needing additional preparation, but rather assigns all cooking and preparation costs of specialty items to manufacturing overhead as either indirect labor or materials. This approach is sensible given that RGB does not sell the items individually and the baskets generally include similar items. The following accounting records for 2020 provide details of the actual overhead costs incurred for each production activity. Production Activity Wrapping Assembling Product design Quality inspection Cooking Indirect Labor Indirect Materials $300,000 $200,000 $400,000 $180,000 $100,000 $150,000 $250,000 Discussions with RGB's managers allowed the accounting department to identify cost drivers (the allocation base) for each of the overhead activities listed above. The next table lists each activity in the manufacturing process, the cost driver (base), and the quantity of the cost driver actually achieved in 2020. For example, the second row indicates that the cost driver (base) for the Assembling activity is the total number of manufacturing labor hours incurred (across all activities) in 2020. Wrapping Assembling Product design Quality inspection 150,000 units 25,000 manufacturing labor hours 4,000 design hours 25,000 manufacturing labor hours Cooking 1,000 batches Pre- made, purchased items included in the Holiday Basket cost RGB $20.00 per basket. For the Executive Basket this cost is $25.00 per basket. RGB's standard pricing policy is to sell its baskets at a mark-up of 100% over the total cost of each product. (.e., if a basket costs $10, then RGB sets the selling price at $20). Additional detail pertaining to the products, the Holiday Basket and the Executive Basket, are given in the following table. Note that Assembling and Quality Inspection use the same cost driver - manufacturing labor hours. Holiday Basket Number of units 15,000 units Total mfg. labor hours 2,500 MLH Design hours 400 design hours Batches 150 batches Executive Basket 10,000 units 5,000 MLH 600 design hours 200 batches CODOC
