## (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) 816 516 616

 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 Requirement 2: Charlene's department uses older, outdated machines.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-hours 25,360 37,600 Labor-hours 25,360 18,300

 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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This question was answered on: Dec 08, 2020

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