Cost Accounting Problem 1 answer below »
I have grasped this concept but cannot seem to be able to remember it. I am having a hard time understanding it. Could you please explain how to find the answer. Thank you. Best Brew Corporation manufactures two brands of wine: Regular and Extra RichBelow is the current year production data for the company:
Regular Extra RichDirect material in pounds 225,000 110,000Direct labor hours 45,000 65,000Machine hours 36,000 24,000Number of setups 1,450 2,375Number of gallons produced 450,000 90,000
The 335,000 pounds of material had a total cost of $753,750. Direct labor is $21 per hour.
The company has total overhead production costs of $2,212,125.
a. If Best Brew Corporation applies factory overhead using direct labor hours, compute the total production cost and the unit cost for each brand
b. If Best Brew Corporation applies factory overhead using machine hours, compute the total production cost and the unit cost for each brand.
c. Assume that Best Brew Corporation has established the following activity centers, cost drivers, and costs to apply factory overhead.
Cost Pool Cost Driver Cost VolumeEquipment Maintenance # of machine hours $450,000 60,000Production Setup # of setups $248,625 3,825Material Handling ounds of Materials $703,500 335,000Storage Costs # of gallons produced $810,000 540,000
Compute the total cost and the unit cost for each brand.
d. Explain why the unit cost for each model is different across the three methods of overhead application. How can this information benefit the organization?
