Monthly Report on Cola Bottling Line Diet Regular Cherry Grape Total Sales $ 168,000 $ 109,200 $ 32,250 $ 9,000 $ 318,450 Less: Materials 60,000 44,400 13,800 5,000 123,200 Direct labor 19,000 11,000...































































































































































































































































































Monthly Report on Cola Bottling Line
DietRegularCherryGrapeTotal
Sales$168,000$109,200$32,250$9,000$318,450
Less:
Materials60,00044,40013,8005,000123,200
Direct labor19,00011,0003,00050033,500
Fringe benefits on direct labor7,6004,4001,20020013,400
Indirect costs (@260% of direct labor)49,40028,6007,8001,30087,100
Gross margin$32,000$20,800$6,450$2,000$61,250
Return on sales (see note
[a])
19.0%19.0%20.0%22.2%19.2%
Volume80,00052,00015,0004,000151,000
Unit price$2.10$2.10$2.15$2.25$2.11
Unit cost$1.70$1.70$1.72$1.75$1.70


a
Return on sales before considering selling, general and administrative expenses.



He then turned to the quietest person in the room—his son, Rocky—and said, “I am suspicious of these cost data, Rocky. Here we are assigning indirect costs to these products using a 260 percent rate. I really wonder whether that rate is accurate for all products. I want you to dig into the indirect cost data, figure out what drives those costs, and see whether you can give me more accurate cost numbers for these products.”



Rocky first learned from production that the process required four activities: (1) setting up production runs, (2) managing production runs, and (3) managing products. The fourth activity did not require labor; it was simply the operation of machinery. Next, he went to the accounting records to get a breakdown of indirect costs. Here is what he found:

















































Indirect labor$33,500
Fringe benefits on indirect labor13,400
Information technology21,400
Machinery depreciation11,000
Machinery maintenance5,200
Energy2,600
Total$87,100


Then, he began a series of interviews with department heads to see how to assign these costs to cost pools. He found that 40 percent of indirect labor was for scheduling or for handling production runs, including purchasing, preparing the production run, releasing materials for the production run, and performing a first-time inspection of the run. Another 50 percent of indirect labor was used to set up machinery to produce a particular product. The remaining 10 percent of indirect labor was spent maintaining records for each of the four products, monitoring the supply of raw materials required for each product, and improving the production processes for each product. This 10 percent of indirect labor was assigned to the cost driver “number of products.”



Interviews with people in the information technology department indicated that $21,400 was allocated to the cola bottling line. 80 percent of this $21,400 information technology cost was for scheduling production runs. 20 percent of the cost was for record keeping for each of the four products.



Fringe benefits were 40 percent of labor costs. The rest of the overhead was used to supply machine capacity of 30,200 hours of productive time.



Rocky then found the following cost driver volumes from interviews with production personnel.



  • Setups: 740 labor-hours for setups.

  • Production runs: 260 production runs.

  • Number of products: 4 products.

  • Machine-hour capacity: 30,200 hours.



Diet cola used 260 setup hours, 100 production runs, and 8,000 machine-hours to produce 80,000 units. Regular cola used 90 setup hours, 60 production runs, and 5,200 machine-hours to produce 52,000 units. Cherry cola used 300 setup hours, 60 production runs, and 1,500 machine-hours to produce 15,000 units. Grape cola used 90 setup hours, 40 production runs,and 400 machine-hours to produce 4,000 units. Rocky learned that the production people had a difficult time getting the taste just right for the Cherry and Grape colas, so these products required more time per setup than either the Diet or Regular colas.




Required:



a.
Recompute the unit costs for each of the cola products: Diet, Regular, Cherry, and Grape.



b.
What is the cost of unused capacity?



c.
Now assume that Rockness is considering producing a fifth product: Vanilla cola. Because Vanilla cola is in high demand in Rockness Bottling’s market, assume that it would use 15,100 hours of machine time to make 151,000 units. (Recall that the machine capacity in this case is 30,200 hours, while Diet, Regular, Cherry, and Grape consume only 15,100 hours.) Vanilla cola’s per unit costs would be identical to those of Diet cola except for the machine usage costs. What would be the cost of Vanilla cola? Calculate on a per-unit basis, and then in total.


Complete this question by entering your answers in the tabs beloOw.<br>Required A<br>Required B<br>Required C<br>Recompute the unit costs for each of the cola products: Diet, Regular, Cherry, and Grape. (Round cost driver rates to 3<br>decimal places and other intermediate calculations to nearest whole dollar value. Round cost per unit answers to 2 decimal<br>places.)<br>Unit Costs on Cola Bottling Line<br>Diet<br>Regular<br>Cherry<br>Grape<br>Total<br>Materials<br>Direct labor<br>Fringe benefits on direct labor<br>Setup costs<br>Production run costs<br>Product costs<br>Machine costs<br>Total costs<br>2$<br>0 $<br>$<br>$<br>Volume<br>Cost per unit<br>Required A<br>Required B<br>><br>

Extracted text: Complete this question by entering your answers in the tabs beloOw. Required A Required B Required C Recompute the unit costs for each of the cola products: Diet, Regular, Cherry, and Grape. (Round cost driver rates to 3 decimal places and other intermediate calculations to nearest whole dollar value. Round cost per unit answers to 2 decimal places.) Unit Costs on Cola Bottling Line Diet Regular Cherry Grape Total Materials Direct labor Fringe benefits on direct labor Setup costs Production run costs Product costs Machine costs Total costs 2$ 0 $ $ $ Volume Cost per unit Required A Required B >
c. Now assume that Rockness is considering producing a fifth product: Vanilla cola. Because Vanilla cola is in high demand in<br>Rockness Bottling's market, assume that it would use 15,100 hours of machine time to make 151,000 units. (Recall that the machir<br>capacity in this case is 30,200 hours, while Diet, Regular, Cherry, and Grape consume only 15,100 hours.) Vanilla cola's per unit co<br>would be identical to those of Diet cola except for the machine usage costs. What would be the cost of Vanilla cola? Calculate or<br>per-unit basis, and then in total.<br>Complete this question by entering your answers in the tabs below.<br>Required A<br>Required B<br>Required C<br>Now assume that Rockness is considering producing a fifth product: Vanilla cola. Because Vanilla cola is in high demand in<br>Rockness Bottling's market, assume that it would use 15,100 hours of machine time to make 151,000 units. (Recall that the<br>machine capacity in this case is 30,200 hours, while Diet, Regular, Cherry, and Grape consume only 15,100 hours.) Vanilla<br>cola's per unit costs would be identical to those of Diet cola except for the machine usage costs. What would be the cost of<br>Vanilla cola? Calculate on a per-unit basis, and then in total. (Do not round intermediate calculations. Round

Extracted text: c. Now assume that Rockness is considering producing a fifth product: Vanilla cola. Because Vanilla cola is in high demand in Rockness Bottling's market, assume that it would use 15,100 hours of machine time to make 151,000 units. (Recall that the machir capacity in this case is 30,200 hours, while Diet, Regular, Cherry, and Grape consume only 15,100 hours.) Vanilla cola's per unit co would be identical to those of Diet cola except for the machine usage costs. What would be the cost of Vanilla cola? Calculate or per-unit basis, and then in total. Complete this question by entering your answers in the tabs below. Required A Required B Required C Now assume that Rockness is considering producing a fifth product: Vanilla cola. Because Vanilla cola is in high demand in Rockness Bottling's market, assume that it would use 15,100 hours of machine time to make 151,000 units. (Recall that the machine capacity in this case is 30,200 hours, while Diet, Regular, Cherry, and Grape consume only 15,100 hours.) Vanilla cola's per unit costs would be identical to those of Diet cola except for the machine usage costs. What would be the cost of Vanilla cola? Calculate on a per-unit basis, and then in total. (Do not round intermediate calculations. Round "Per unit" to 5 decimal places.) Show less A Cost of vanilla cola per unit Total cost of vanilla cola produced < required b required c required="" b="" required="">
Jun 10, 2022
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