NAME: ACC 203 FS18 EXAM CHAPTERS 14-17 DUE MONDAY 7/2/18 at 12:30 6. (15 Points)

Question

NAME: ACC 203 FS18 EXAM CHAPTERS 14-17 DUE MONDAY 7/2/18 at 12:30 6. (15 Points) Assume New Belgium Brewing Company manufactures and distributes three types of beer and that estimated per unit product costs and related information for the next year are shown in the following table Blue Cocoa Cost data per unit Direct materials Direct labor Overhead Paddle Somersault Mole Ale $100,000 $500,000 $750,000 S12,000$16,000$20,000 S3,600 $4,800 6,000 Total product cost per unit Machine hours per unit Number of units produced per year30 units 20 units10 units 30 MH | 40 MH 50 MH a. If New Belgium Brewing Company uses a plantwide overhead rate based on machine hours, what is the total product cost per unit of Cocoa Mole Ale? b. Blue Paddle is a traditional brew made in large quantities with long production runs. Somersault is a seasonal beer made in small batches. Cocoa Mole Ale is a specialty beer also made in small batches. Which of the overhead allocation methods studied in this chapter would you recommend that New Belgium Brewing Company use and why?

Explanation / Answer

a Blue Paddle Somerasault Coca Mole Ale Total 1 Overhead per unit ( $)             100,000            500,000                    750,000 2 Number of units produced during the year (units )                      30                      20                              10 3 Total overhead cost for the year ( 1 x 2)         3,000,000       10,000,000                 7,500,000             20,500,000 4 Machine Hours per unit (MH)                      30                      40                              50 5 Total Machine Hours worked during the year( MH)- ( 2 x 4 )                    900                    800                           500                       2,200 Plantwide overhead rate = $ 20,500,000 / 2,200 MH = $ 9,318 per MH b 1. New Belgium Brewing Company is producing three types of different variety products. 2. Production volume for each type of product is different. 3. Production batch size of each product type is different. Therefore, ABC costing method is recommended for allocating overhead expenses to determine correct cost of each product type.

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