Willitte Pharmaceuticals manufactures an over-the-counter allergy medication called Breathe and is trying to win market share from Sudafed and Claritin. Willitte Pharmaceuticals has developed several different Breathe products tailored to specific markets. For example, the company sells large commercial containers of 1,000 capsules to health-care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. Willitte Pharmaceuticals' controller, Sandra Dean, has just returned from a conference on ABC. She asks Keith Yeung, supervisor of the Breathe product line, to help her develop an ABC system. Dean and Yeung identify the following activities, related cos : (Click the icon Additional information Requirements Requirement 1. Compute the cost allocation rate for each activity. Estimated Estimated Determine the formula and then compute the cost allocation rate for each activity. (Round your answers to the nearest whole dollar.) Indirect Allocation Quantity of Activity Activity Costs Base Allocation Base Activity overhead rate Materials handling $ Mat. handling / kg Packaging Packaging 198,000 Kilograms 18,000 kg 462,000 Machine hours... 2,100 hours 99,000 Samples .... 1,800 samples 759,000 / hour Quality assurance QA sample Total indirect costs... $ Requirement 2. Use the activity-based cost allocation rates to compute the indirect cost of each unit of the commercial containers and the travel cost per unit.) (Round the cost per unit to the nearest cent.) The commercial-container Breathe product line had a total weight of 8,500 kilograms, used 1,380 machine hours, and required 260 samples. The travel-pack line had a total weight of 6,100 kilograms, used 460 machine hours, and required 410 samples. Willitte produced 3,100 commercial containers of Breathe and 55,000 travel packs. Commercial Container Travel Pack Materials handling Requirements Packaging Quality assurance Total indirect costs 7 Number of units Indirect activity cost per unit 1. Compute the cost allocation rate for each activity. 2. Use the activity-based cost allocation rates to compute the indirect cost of each unit of the commercial containers and the travel packs. (Hint: Compute the total activity costs allocated to each product line and then compute the cost per unit) 3. Willitte Pharmaceuticals' original single-allocation-based cost system allocated indirect costs to products at $320 per machine hour. Compute the total indirect costs allocated to the commercia containers and to the travel packs under the original system. Then, compute the indirect cost pe unit for each product. 4. Compare the activity-based costs per unit to the costs from the original system. How have the u Choose from any list or enter any number in the input fields and then continue to the next question. Inr Willitte Pharmaceuticals manufactures an over-the-counter allergy medication called Breathe and is trying to win market share from Sudafed and Claritin. Willitte Pharmaceuticals has developed several different Breathe products tailored to specific markets. For example, the company sells large commercial containers of 1,000 capsules to health-care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. Willitte Pharmaceutica supervisor of the Breat activities, related costs B!! (Click the icon to Additional information Requirements Requirement 3. Willitte Pharmaceuticals's original single-allocation-based cost system allocated indirect costs to products at $320 per machine hd under the original system. Then, compute the indirect cost per unit for each product. Estimated Estimated Quantity of Indirect cost Indirect Allocation Activity Costs Base 198,000 Kilograms Activity Materials handling Allocation Base Product allocated 18,000 kg Commercial Packaging 2,100 hours Travel X Quality assurance 462,000 Machine hours 99,000 Samples 759,000 1,800 samples $ Now compute the indirect cost per unit for each product under the original single-allocation-base system. (Round the cost per unit to the neares Total indirect costs. Commercial Container Travel Pack Total indirect costs allocated The commercial-container Breathe product line had a total weight of 8,500 kilograms, used 1,380 machine hours, and required 260 samples. The travel-pack line had a total weight of 6,100 kilograms, used 460 machine hours, and required 410 samples. Willitte produced 3,100 commercial containers of Breathe and 55,000 travel packs. / Number of units Indirect cost per unit Print Done Requirement 4. Compare the activity-based costs per unit to the costs from the original system. How have the unit costs changed? Explain why th The original system the commercial containers and the travel packs. The original system allocated However, commercial containers The ABC So, relative to the original system, ABC allocates of the material handling and quality assurance system costs to commercial containers
