T-Mobile Wi-Fi 11:30 PM Problem 7-25.pdf *Problem 7-25 Sheridan's Nut House is a processor and distributor of a variety of different nuts. The company buys nuts from around the world and roasts, seasons, and packages them for resale. Sheridan's Nut House currently offers 21 different types of nuts in one-pound bags through catalogs and gourmet shops. The company's major cost is that of the raw nuts; however, the predominantly automated roasting and packing processes consume a substantial amount of manufacturing overhead cost. The company uses relatively little direct labor. Some of Sheridan's nuts are very popular and sell in large volumes, but a few of the newer types sell in very low sales volumes. Sheridan's prices its nuts at cost (including overhead) plus a markup of 40%. If the resulting prices of certain nuts are significantly higher than the market price, adjustments are made. Although the company competes primarily on the quality of its products, customers are price conscious. Data for the annual budget include manufacturing overhead of $5,607,540, allocated on the basis of each product's direct labor cost. The annual budgeted direct labor cost totals $1,222,000. Based on the sales budget and raw materials standards, purchases and use of raw materials are expected to total $9,068,000 for the year. The unit costs of a one-pound bag of two of the company's products follows. Cashews Chestnuts Raw materials Direct labor $4.50 $3.50 0.26 0.26 Sheridan's controller believes that the traditional costing system may be providing misleading cost information, so she has developed the following analysis of the annual budgeted manufacturing costs. Activity Purchasing Material handling Cost Driver Purchase orders Number of setups Budgeted Activity Budgeted Cost 11,370 $1,227,960 1,830 1,418,250 Quality control Number of batches 620 Roasting Roasting hours 96,450 297,600 1,639,650 Seasoning Seasoning hours 33,740 573,580 Packaging Packaging hours 26,500 450,500 Total manufacturing overhead cost $5,607,540 Data regarding the annual production of cashews and chestnuts follow. All raw materials purchased during the period are processed and all nuts produced are sold within the period. Expected sales Batch size Setups Purchase order size Cashews 115,800 lbs. 10,000 lbs. 3 per batch 2,500 lbs. Chestnuts 2,000 lbs. 500 lbs. 3 per batch 50 lbs. Roasting time Seasoning time Packaging time 1.10 hour/100 lbs. 1.1 hour/100 lbs. 0.6 hour/100 lbs. 0.1 hour/100 lbs. 0.6 hour/100 lbs. 0.1 hour/100 lbs. Using the current costing system, calculate the cost and selling price of one pound of cashews and one pound of chestnuts. (Round predetermined overhead rate to 0 decimal places, e.g. 25% and final answers to 2 decimal places, e.g. 15.25.) Cashews Chestnuts /lb. /lb. Cost $ $ /lb. /lb. Selling Price $ $ Calculate ABC rates. T-Mobile Wi-Fi 11:30 PM Problem 7-25.pdf Sheridan's controller believes that the traditional costing system may be providing misleading cost information, so she has developed the following analysis of the annual budgeted manufacturing costs. Activity Purchasing Cost Driver Purchase orders Budgeted Activity Budgeted Cost 11,370 $1,227,960 Material handling Number of setups 1,830 1,418,250 Quality control Number of batches 620 297,600 Roasting Roasting hours 96,450 1,639,650 Seasoning Seasoning hours 33,740 573,580 Packaging Packaging hours 26,500 450,500 Total manufacturing overhead cost $5,607,540 Data regarding the annual production of cashews and chestnuts follow. All raw materials purchased during the period are processed and all nuts produced are sold within the period. Expected sales Batch size Setups Purchase order size Cashews 115,800 lbs. Chestnuts 2,000 lbs. 10,000 lbs. 500 lbs. 3 per batch 3 per batch 2,500 lbs. 50 lbs. Roasting time Seasoning time Packaging time 1.10 hour/100 lbs. 1.1 hour/100 lbs. 0.6 hour/100 lbs. 0.1 hour/100 lbs. 0.6 hour/100 lbs. 0.1 hour/100 lbs. Using the current costing system, calculate the cost and selling price of one pound of cashews and one pound of chestnuts. (Round predetermined overhead rate to 0 decimal places, e.g. 25% and final answers to 2 decimal places, e.g. 15.25.) Cashews Cost $ /lb. $ Chestnuts /lb. /lb. /lb. Selling Price $ $ Calculate ABC rates. Cost Pool Activity Rate Purchasing $ /purchase order Material handling $ /setup Quality control $ /batch Roasting $ /roasting hour Seasoning /seasoning hour Packaging /packaging hour Using an activity-based costing approach and the information provided, calculate the cost and selling price of one pound of cashews and one pound of chestnuts. (Round all rates and final answers to 2 decmial places, e.g. 15.25.) Cashews /lb. Chestnuts /lb. Cost $ $ / lb. / lb. Selling Price $ $ Question Attempts: 0 of 15 used