Vaughns 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. Vaughns Nut House currently offers 15 different types of nuts in one-pound bags through catalogs and gourmet shops. The companys 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 Vaughns nuts are very popular and sell in large volumes, but some of the newer types sell in very low volumes. Vaughns prices its nuts at cost (including overhead) plus a markup of 50%. 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 $6,966,000, allocated on the basis of each products direct labor cost. The annual budgeted direct labor cost totals $1,393,200. Based on the sales budget and raw materials standards, purchases and use of raw materials are expected to total $9,000,000 for the year. The unit raw material and direct labor costs of a one-pound bag of two of the companys products follows.

Raw materials Cashews $4.50 0.30 Chestnuts $3.20 0.30 Direct labor Vaughn'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. Cost Driver Budgeted Activity 11,460 1,800 600 Activity Purchasing Material handling Quality control Roasting Seasoning Packaging Total manufacturing overhead cost Purchase orders Number of setups Number of batches Roasting hours Seasoning hours Packaging hours Budgeted Cost $2,292,000 1,260,000 300,000 1,922,000 672,000 520,000 $6,966,000 96,100 33,600 26,000 Data regarding the annual production of cashews and chestnuts follow. There will be no Raw Materials Inventory for either type of nuts at the beginning of the year. Expected sales Batch size Setups Purchase order size Roasting time Seasoning time Packaging time Cashews 100,000 lbs. 10,000 lbs. 3 per batch 2,000 lbs. 1 hour/100 lbs. 0.50 hour/100 lbs. 0.10 hour/100 lbs. Chestnuts 5,000 lbs. 500 lbs. 4 per batch 2,500 lbs. 2 hour/100 lbs. 0.50 hour/100 lbs. 0.10 hour/100 lbs. (a) Your answer is correct. 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 $ 6.3 /lb. $ Cost 5 /lb. $ 9.45 Selling Price /lb. $ 7.5 b. Your answer is correct. Calculate ABC rates. Cost Pool Activity Rate 200 Purchasing /purchase order $ 700 Material handling /setup $ 500 /batch Quality control $ 20 /roasting hour Roasting $ 20 /seasoning hour Seasoning $ 20 Packaging /packaging hour e Textbook and Media Attempts: 1 of 3 used - Your answer is incorrect. 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 Chestnuts $ / Ib. $ /lb. Cost /lb. $ /lb. Selling Price e Textbook and Media