Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direct labor-hours at a rate of $2 per labor-hour. Strawberry and vanilla flavors are produced in Department SV. Chocolate is produced in Department C. Sven manages Department SV and Charlene manages Department C. The product costs (per thousand gallons) follow. Strawberry Vanilla Chocolate Direct labor (per 1,000 gallons) $ 753 $ 828 $ 1,128 Raw materials (per 1,000 gallons) 803 503 603 Required: a. If the number of hours of labor per 1,000 gallons is 50 for strawberry, 62 for vanilla, and 160 for chocolate, compute the total cost of 1,000 gallons of each flavor using plantwide allocation. b. Charlene's department uses older, outdated machines. She believes that her department is being allocated some of the overhead of Department SV, which recently bought state-of-the-art machines. After she requested that overhead costs be broken down by department, the following information was discovered: Department SV Department C Overhead $ 88,305 $ 17,195 Machine-hours 25,230 36,300 Labor-hours 25,230 18,100 Using machine-hours as the department allocation base for Department SV and labor-hours as the department allocation base for Department C, compute the allocation rate for each. c. Compute the cost of 1,000 gallons of each flavor of ice cream using the department allocation rates computed in requirement (b) if the number of machine-hours for 1,000 gallons of each of the three flavors of ice cream are as follows: strawberry, 50; vanilla, 62; and chocolate, 153. Direct labor-hours by product remain the same as in requirement (a). Using machine-hours as the department allocation base for Department SV and labor-hours as the department allocation base for Department C, compute the allocation rate for each. (Round your answers to 2 decimal places.) Allocation Rate Department SV per machine hour Department C per labor hour Compute the cost of 1,000 gallons of each flavor of ice cream using the department allocation rates computed in requirement (b) if the number of machine-hours for 1,000 gallons of each of the three flavors of ice cream are as follows: strawberry, 50; vanilla, 62; and chocolate, 153. Direct labor-hours by product remain the same as in requirement (a). Total Cost Strawberry Vanilla Chocolate
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Main Street Ice Cream Company uses a plantwide allocation method to allocate
| Strawberry | Vanilla | Chocolate | |||||||
| Direct labor (per 1,000 gallons) | $ | 753 | $ | 828 | $ | 1,128 | |||
| Raw materials (per 1,000 gallons) | 803 | 503 | 603 | ||||||
Required:
a. If the number of hours of labor per 1,000 gallons is 50 for strawberry, 62 for vanilla, and 160 for chocolate, compute the total cost of 1,000 gallons of each flavor using plantwide allocation.
b. Charlene's department uses older, outdated machines. She believes that her department is being allocated some of the overhead of Department SV, which recently bought state-of-the-art machines. After she requested that overhead costs be broken down by department, the following information was discovered:
| Department SV | Department C | |||||
| Overhead | $ | 88,305 | $ | 17,195 | ||
| Machine-hours | 25,230 | 36,300 | ||||
| Labor-hours | 25,230 | 18,100 | ||||
Using machine-hours as the department allocation base for Department SV and labor-hours as the department allocation base for Department C, compute the allocation rate for each.
c. Compute the cost of 1,000 gallons of each flavor of ice cream using the department allocation rates computed in requirement (b) if the number of machine-hours for 1,000 gallons of each of the three flavors of ice cream are as follows: strawberry, 50; vanilla, 62; and chocolate, 153. Direct labor-hours by product remain the same as in requirement (a).
Using machine-hours as the department allocation base for Department SV and labor-hours as the department allocation base for Department C, compute the allocation rate for each. (Round your answers to 2 decimal places.)
|
|
|
Compute the cost of 1,000 gallons of each flavor of ice cream using the department allocation rates computed in requirement (b) if the number of machine-hours for 1,000 gallons of each of the three flavors of ice cream are as follows: strawberry, 50; vanilla, 62; and chocolate, 153. Direct labor-hours by product remain the same as in requirement (a).
|
|
|
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
