14. Assume that a pet food manufacturer, is considering adding two types of pet

Question

14. Assume that a pet food manufacturer, is considering adding two types of pet food to its existing product line. Research had determined that good demand exists for dog food in 40-pound bags and cat food in 1/2pound cans. The company identified the following partial list of activities, costs, and activity drivers expected for the next year: Activity Storage costs Handling materials 820,000 $105,000 Weight of finished product Number of batches made Production volume Batches made Dog Food 100,000 units 200 batches Cat Food 200,000 units 150 batches What are the overhead rates used to apply material handling (MH) and storage costs (SC) using activity-based costing? A. MH $300/batch; SC $2.73/unit. B. MH $300/batch; SC $.20/1b C. D. E. MH $525/batch; SC $.205/unit. MH $700/batch; SC $.205/lb. MH S700/batch: SC S8.20/lb. 15. MOMCO has two products: A1 and B2. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools: Activity Cost Pool Budgeted Cost Budgeted Activity Product A1 Product B2 Activity 1 Activity 2 Activity 3 48,000 $63,000 80,000 1,200 2,240 7,200 4,800 4,760 800 Annual production and sales level of Product A1 is 8,480 units, and the annual production and sales level of product B2 is 22,310 units. What is the approximate overhe ad cost per unit of Product A1 under activity-based costing? A. $8.00 B. $9.00 C. $10.00 D. $12.00 E. $4.00

Explanation / Answer

Solution 14:

Total weight of finished products (In pound) = (100000*40) + (200000 * 0.5) = 4100000 pounds

Hence option B is correct.

Solution 15:

Overhead cost per unit of Product A1 = $12 per unit

Hence option D is correct.

Determination of activity rate for each activity Activity Budgeted Costs Cost driver Usage of Activity Base Activity Rate Storage Cost $820,000.00 Weight of finish product 4100000 $0.20 per pound Handling Materials $105,000.00 Nos of batches made 350 $300.00 per batch

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