A-1 complete the table under the current cost system. A-2 determine which products, if any, should be dropped. C-1 Assume that CBI drops the product(s) identified in requirement (a) above. Calculate the gross profit margin percentage for the remaining products. Assume that CBI can sell all products that it manufactures and that it will use the excess capacity from dropping a product to produce more of the most profitable product. Required:-1. Complete the table under the current cost system.2. Determine which product(s), If any, should be dropped.c-1. Assume that CBI drops the product(s) Identifled in requirement (a) above. Calculate the gross profit margin percentage for theremaining products. Assume that CBI can sell all products that it manufactures and that it will use the excess capacity from dropping aproduct to produce more of the most profitable product.c-2. If CBI maintalns Its current rule about dropping products, which additional products, if any, should CBI drop under the existing costsystem?d-1. Assume that CBI drops the products identifled in requirements (a) and (c) above. Recalculate the gross profit margin percentagefor the remaining productis) and ascertain whether any additional product(s) should be dropped.d-2. Which additional products, If any, should CBI drop under the existing cost system?Complete this question by entering your answers in the tabs below.Req A1Reg A2Req C1Reg C2Reg D1Reg D2Complete the table under the current cost system. (Round your intermediate calculations and final answers to 2 decimalplaces. Negative values should be indicated with a minus sign.)KrispyKrackleCreamy CrunchAlmond DreamProduct costs:8.304.301.00Labor-hours per caseTotal cases produced1,0001,0001,0003.30$ 25.80Material cost per case9.30%2.9.8049.80%246.00Direct labor cost per caseLabor-hours per product8,3004,3001,000Total overhead$ 76,000Total labor-hours13,600Direct labor costs per hour6.00Allocation rate per labor-hourCosts of products:Material cost per case9.30%243.309.80Direct labor cost por caso49.8025.806.00Allocated overhead per caseProduct costSeling priceGross profit margin percentage In reviewing cost reports with the marketing manager, Steve Hoffman, who is the cost accountant, notices that Creamy Crunch appearsexceptionally profitable and that Almond Dream appears to be produced at a loss. This surprises both him and the manager, and aftermuch discussion, they are convinced that the cost accounting system is at fault and that Almond Dream is performing very well at thecurrent market price.Steve decides to hire Jean Sharpe, a management consultant, to study the firm's cost system over the next month and present herfindings and recommendations to senior management. Her objective is to identify and demonstrate how the cost accounting systemmight be distorting the firm's product costs.Jean begins her study by gathering information and documenting the existing cost accounting system. It is rather simplistic, using asingle overhead allocation base-direct labor-hours-to calculate and apply overhead rates to all products. The rate is calculated bysumming varlable and fixed overhead costs and then dividing the result by the number of direct labor-hours. The product cost isdetermined by multiplying the number of direct labor-hours required to manufactute the product by the overhead rate and adding thisamount to the direct labor and direct material costs.CBI engages in two distinct production processes for each product. Process 1 is labor Intensive, using a high proportion of directmaterials and labor. Process 2 uses special packing equipment that wraps each individual candy bar and then packs it into a box of 24bars. The boxes are then packaged into cases, each of which has six boxes. Special packing equipment is used on all three productsand has a monthly capacity of 3,000 cases, each containing 144 candy bars ( 6 boxes 24 bars).To illustrate the source of the distortions to senior management, Jean collects the cost date for the three products, Almond Dream,Krispy Krackle, and Creamy Crunch.AlmondXrispyKrackleCreamyDreanCrunchProduct costaLabor-hours per caseTotal cases producedMaterial cost per easeDirect labor eost per easeLabor-hours per productTotal overhead $76,000Total labor-hours 13,600Direct labor costa per hour 6.00Allocation rate per labor-bour (a).Costa of produetsMaterial cost per caseDirect labor cost per caseAllocated overhead per case(to be computed)8.34.31.01,000$9.30$ 49.801,000$3.301,000$9.80$25.80$4.001.0008,3004.300$9.30$ 3.30$9.8049.8025.806.00(b)(e)Froduct cost(e)(9)CBI recently adopted a general policy to discontinue all products whose gross profit margin percentages ((Gross margin Sellingprice) 100] were less than 10 percent. By comparing the selling prices to the firm's costs and then calculating the gross marginpercentages, Jean could determine which products, under the current cost system, should be dropped. The current selling prces ofAlmond Dream, Krispy Krackle, and Creamy Crunch are $98.00, $61.00, and $30.00 per case, respectively. Overhead will remain$76,000 per month under all alternatives.

Overhead costs are indirect costs related to production and manufacturing of product and these costs…

Answered: A-1 complete the table under the…

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter2: Accounting For Materials

Section: Chapter Questions

Problem 2MC