Direct materials per liter Direct labor cost per liter Direct labor hours per li

ID: 2417963 • Letter: D

Question

Direct materials per liter Direct labor cost per liter Direct labor hours per liter Total direct labor hours CoolDay $0.40 $0.25 0.04 120,000 $1.20 S0.50 0.09 27,000 Expected Use of Cost Drivers per Product Expected Use of Cost Drivers Activity Cost Pools Cost Drivers Estimated Overhead CoolDay LiteMist Grape processing Aging Bottling and corking Labeling and boxing Maintain and inspect equipment Cart of grapes Total months Number of bottles Number of bottles Number of inspections $146,784 666,600 288,900 200,700 244,000 $1,546,984 6,600 6,000 600 6,600,000 3,000,000 3,600,000 900,000 600,000 300,000 300,000 450 600,000 350 900,000 800 Answer each of the following questions (a) and (b) (1) Under traditional product costing using direct labor hours, compute the total manufacturing cost per liter of both products. (Round answers to 3 decimal places, e.g. $12.250.) Manufacturing cost per liter (2) Under ABC, prepare a schedule showing the computation of the activity-based overhead rates. (Round overhead rates to 3 decimal places, eg. 12.250.) Activity Cost Pools of Cost Drivers Overhead Rates Grape processing Aging Bottling and corking Labeling and boxing Maintain and inspect equipment per cart per month per bottle per bottle per inspection

Explanation / Answer

(a)

Total direct labour hours = 120000 + 27000 = 147000

Total overhead cost = $1546984

Overhead allocation rate = $1546984 / 147000 hours = $10.524 per direct labour hours

Cost of production

Coolday

Litemist

Direct material

$ 0.40

$ 1.20

Direct labour cost

$ 0.25

$ 0.50

Manufacturing overhead

0.04 hours x $10.524/hour

$ 0.42

0.09 hour x $10524/hour

$ 0.95

Total manufacturing cost per litre

$ 1.07

$ 2.65

activity cost pools

estimated overhead

expected use of cost drivers

activity based overhead rates

Grape Processing

$146784

6600

$22.24

per cart

Ageing

666600

6600000

0.101

Per month

Bottling and Corking

288900

900000

0.321

per bottle

Labelling and Boxing

200700

900000

0.223