Identify an improved method for allocating costs to the

Reference no: EM13485216

flavors of cookies: Macaroon, Sugar, and Buttercream. The batch size for the cookies is limited to 1,000 cookies based on the size of the ovens and cookie molds owned by the company. Based on budgetary projections, the information listed below is available:

Macaroon Sugar Buttercream

Projected sales in units 500,000 800,000 600,000

PER UNIT data:

Selling price $0.80 $0.75 $0.60

Direct materials $0.20 $0.15 $0.14

Direct labor $0.04 $0.02 $0.02

Hours per 1000-unit batch:

Direct labor hours 2 1 1

Oven hours 1 1 1

Packaging hours 0.5 0.5 0.5

Total overhead costs and activity levels for the year are estimated as follows:

Activity Overhead costs Activity levels

Direct labor 2,400 hours

Oven $210,000 1,900 oven hours

Packaging $150,000 950 packaging hours

$360,000

Required:

1.Suppose Aunt Ethel's uses direct labor hours to allocate all overhead costs. Prepare product line and total company income statements.

2.Identify an improved method for allocating costs to the three product lines. Explain. Use the method that you propose to prepare new product line and total company income statements.

3.Compare your results for requirement 1 and 2 and write a brief memo to Aunt Ethel's management describing how the improved system might be useful for managing the production costs of the cookies.

Reference no: EM13485216

Questions Cloud

Calculate gross receivables for the years given and then : 20122011from the income statementnet sales729373678960from the balance sheetaccounts receivable net1491915036customer

In preparing the cash budget assume that the 52000 loan : faces au natural corp. a distributor of natural cosmetics is ready to begin its third quarter in which peak sales

If a capital market is not efficient what is the impact on : if a capital market is not efficient what is the impact on a firm seeking to raise capital in that market?

Flip earns a salary of 7500 per month during the year fica : flip earns a salary of 7500 per month during the year. fica taxes are 8 on the first 100000 of gross earnings. federal

Identify an improved method for allocating costs to the : flavors of cookies macaroon sugar and buttercream. the batch size for the cookies is limited to 1000 cookies based on

How is the annual financing cost for a short-term : how is the annual financing cost for a short-term financing source calculated? how does the annual financing cost

What four financial statements can be found in a firms 10-k : what four financial statements can be found in a firms 10-k filing? what checks are there on the accuracy of these

What effect did the expansion have on sales and net income : what effect did the expansion have on sales and net income? what effect did the expansion have on the asset side of the

What does it mean when a companys return on assets roa is : what does it mean when a companys return on assets roa is equal to its return on equity

User Account

All Pages