Vaughn'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. Vaughn's Nut House currently offers 15 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 Vaughn's nuts are very popular and sell in large volumes, but a few of the newer types sell in very low sales volumes. Vaughn'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 $6,402,210, allocated on the basis of each product's direct labor cost. The annual budgeted direct labor cost totals $1,213,000. Based on the sales budget and raw materials standards, purchases and use of raw materials are expected to total $9,053,000 for the year. The unit costs of a one-pound bag of two of the company's products follows. udy. Cashews Chestnuts Raw materials $4.30 $3.31 0.25 0.25 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. Direct labor Activity Purchasing Material handling Quality control Roasting Seasoning Packaging Total manufacturing overhead cost Cost Driver Purchase orders Number of setups Number of batches Roasting hours Seasoning hours Packaging hours Budgeted Activity 11,380 1,810 590 95,990 33,980 26,190 Budgeted Cost $1,172,140 1,511,350 283,200 2,111,780 747,560 576,180 $6,402,210 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. Total manufacturing overhead cost $6,402,210 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. Cashews Chestnuts Expected sales 120,300 lbs. 3,000 lbs. Batch size 10,000 lbs. 1,000 lbs. Setups 4 per batch 4 per batch Purchase order size 2,500 lbs 50 lbs. Roasting time 1.20 hour/100 lbs 1.2 hour/100 lbs. Seasoning time 0.7 hour/100 lbs. 0.7 hour/100 lbs. Packaging time 0.1 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 Cost /lb. $ b. /lb. Selling Price $ /lb. 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 LINK TO TEXT LINK TO TEXT LINK TO VIDEO LINK TO VIDEO 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 Cost /lb. /lb. $ /lb. / lb Selling Price $ $
