Question 2 The Dairy Division of BMC, located in the city of Colac, operates at capacity, and considers applying ABc analysis to three product lines within its division: full cream milk, skim milk, and almond milk. The manager of this division identifies four activities, and their activity cost allocation rates as follows: $100 per purchase order Ordering Machine set up $75 per set up Freezing $5 per hour Packaging $0.15 per item sold The revenues, cost of goods sold, and activity usage of the three product lines are as follows: Table 2- Dairy Division, year 2021 Year 2021 Full Cream Skim Almond Financial data $250,000 $40,000 Revenues $150,000 $75,000 $15,000 Direct manufacturing cost Manufacturing overhead allocated Activity-area usage (cost-allocation base) Ordering (purchase orders) Machine set up (setups) Freezing (hours) Packaging (items sold) $25,000 ? ? 200 100 60 90 35 30 190 180 40 100,000 60,000 8,000 Using a division-wide allocation rate, the Dairy Division of BMC allocated manufacturing overhead to the three products at the rate of 30% of direct manufacturing cost. Required a) Using the division-wide allocation rate, calculate and identify which product line has the highest gross margin in dollars and in percentage (i.e., gross profit/revenue). (Qus+ i b) Using ABC, calculate and determine the profitability (i.e., gross profit/revenue) of the three product lines (i.e., specify the highest, the middle, and the lowest profitable product line).
Question 2 The Dairy Division of BMC, located in the city of Colac, operates at capacity, and considers applying ABc analysis to three product lines within its division: full cream milk, skim milk, and almond milk. The manager of this division identifies four activities, and their activity cost allocation rates as follows: $100 per purchase order Ordering Machine set up $75 per set up Freezing $5 per hour Packaging $0.15 per item sold The revenues, cost of goods sold, and activity usage of the three product lines are as follows: Table 2- Dairy Division, year 2021 Year 2021 Full Cream Skim Almond Financial data $250,000 $40,000 Revenues $150,000 $75,000 $15,000 Direct manufacturing cost Manufacturing overhead allocated Activity-area usage (cost-allocation base) Ordering (purchase orders) Machine set up (setups) Freezing (hours) Packaging (items sold) $25,000 ? ? 200 100 60 90 35 30 190 180 40 100,000 60,000 8,000 Using a division-wide allocation rate, the Dairy Division of BMC allocated manufacturing overhead to the three products at the rate of 30% of direct manufacturing cost. Required a) Using the division-wide allocation rate, calculate and identify which product line has the highest gross margin in dollars and in percentage (i.e., gross profit/revenue). (Qus+ i b) Using ABC, calculate and determine the profitability (i.e., gross profit/revenue) of the three product lines (i.e., specify the highest, the middle, and the lowest profitable product line).
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter12: Integer Linear Optimization_models
Section: Chapter Questions
Problem 6P: Hart Manufacturing makes three products. Each product requires manufacturing operations in three...
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Transcribed Image Text:Question 2
The Dairy Division of BMC, located in the city of Colac, operates at capacity, and considers applying ABC
analysis to three product lines within its division: full cream milk, skim milk, and almond milk. The manager of
this division identifies four activities, and their activity cost allocation rates as follows:
$100 per purchase order
$75 per set up
Ordering
Machine set up
$5 per hour
$0.15 per item sold
Freezing
Packaging
The revenues, cost of goods sold, and activity usage of the three product lines are as follows:
Table 2- Dairy Division, year 2021
Year 2021
Full Cream
Skim
Almond
Financial data
$250,000
$40,000
$150,000
$25,000
$75,000
$15,000
Revenues
Direct manufacturing cost
Manufacturing overhead allocated
?
?
?
Activity-area usage (cost-allocation base)
Ordering (purchase orders)
200
100
60
Machine set up (setups)
90
35
30
Freezing (hours)
190
180
40
Packaging (items sold)
100,000
60,000
8,000
Using a division-wide allocation rate, the Dairy Division of BMC allocated manufacturing overhead to the three
products at the rate of 30% of direct manufacturing cost.
Required
a) Using the division-wide allocation rate, calculate and identify which product line has the highest gross
margin in dollars and in percentage (i.e., gross profit/revenue). (+
b) Using ABC, calculate and determine the profitability (i.e., gross profit/revenue) of the three product
lines (i.e., specify the highest, the middle, and the lowest profitable product line).
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