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(Solution Download) Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direc


 

 

 

 

 

 

 

Main Street Ice Cream Company uses a plantwide allocation method

 

to allocate overhead based on direct labor-hours at a rate of $2

 

per labor-hour. Strawberry and vanilla flavors are produced in

 

Department SV. Chocolate is produced in Department C. Sven manages

 

Department SV and Charlene manages Department C. The product costs

 

(per thousand gallons) follow:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Strawberry

 

Vanilla

 

Chocolate

  Direct labor (per

 

1,000 gallons)

$766$841$1,141
  Raw materials (per

 

1,000 gallons)

816516616

 

 

 

 

 

 

 

 

 

 

Requirement

 

1:

 

If the number of hours of labor per 1,000 gallons is 60 for

 

strawberry, 70 for vanilla, and 100 for chocolate, compute the

 

total cost of 1,000 gallons of each flavor using plantwide

 

allocation. (Omit the "$" sign in your

 

response.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

cost

  Strawberry$

 

1,702   

  Vanilla

 

$1,497    

  Chocolate

 

$1,957    

 

 

 

 

 

 

 

 

 

 

Requirement

 

2:

 

Charlene's department uses older, outdated machines. She

 

believes that her department is being allocated some of the

 

overhead of Department SV, which recently bought state-of-the-art

 

machines. After she requested that overhead costs be broken down by

 

department, the following information was discovered:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Department SV

 

Department C

  Overhead$88,760$915
  Machine-hours25,36037,600
  Labor-hours25,36018,300

 

 

 

 

 

 

 

 

Using machine-hours as the department allocation base for

 

Department SV and labor-hours as the department allocation base for

 

Department C, compute the allocation rate for each. (Round

 

your answers to 2 decimal places. Omit the "$" sign in your

 

response.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation

 

rate

  Department SV

 

$  3.50    

  Department C$ 0.05

 

 

 

 

 

 

 

 

 

 

Requirement

 

3:

 

Compute the cost of 1,000 gallons of each flavor of ice cream

 

using the department allocation rates computed in requirement 2 if

 

the number of machine-hours for 1,000 gallons of each of the three

 

flavors of ice cream are as follows: strawberry, 60; vanilla, 70;

 

and chocolate, 166. Direct labor hours by product remain the same

 

as in requirement 1. (Round your intermediate calculations

 

and final answers to the nearest dollar amount. Omit the "$" sign

 

in your response.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

cost

  Strawberry

 

$    

  Vanilla

 

$    

  Chocolate

 

$    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Requirement

 

4:

(a)Was Charlene correct in her

 

belief?

(Click to select)YesNo

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b)Department allocation generally

 

yields more accurate product cost information.

(Click to select)FalseTrue

 


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