Stutft produces different styles of potato chips (ruffled, flat, thick cut, gour
ID: 2547794 • Letter: S
Question
Stutft produces different styles of potato chips (ruffled, flat, thick cut, gourmet) for different corporate customers Each style of potato chip requires diflerent preparation imes, different cooking and draining tmes (depending on desired fat content), and dflerent packaging (single serving versus buk) Therefore, Stufft has decided to try ABC costing to better capture the manufacturing overhead costs incurred by each style of chip. Stufft has identified the following activities related to yearly MOH costs and cost drivers associated with producing potato chips EB (Click the icon to view the data.) Compute the activity cost allocation rates for each activity assurning the following total estimated activity for the year 15,000 preparation hours, 30,000 cooking and draining hours, and 6 million packages Begin by determining the tormula for calculating activity cost allocaton rate, then calculate the rates for each activity (Round your final answers to the nearest cent.) Activity cost allocation r Data Machine Overhead 600,000 Preparation tine Activity Preparation Cooking and draining Packaging Cost Driver 900,000 Cooking and draining time 300,000 Units packaged Print Done
Explanation / Answer
Preparation:
Overhead Cost = $600,000
Number of preparation hours = 15,000
Cost Allocation Rate = Overhead Cost / Number of preparation hours
Cost Allocation Rate = $600,000 / 15,000
Cost Allocation Rate = $40.00 per preparation hour
Cooking and Draining:
Overhead Cost = $900,000
Number of cooking and draining hours = 30,000
Cost Allocation Rate = Overhead Cost / Number of cooking and draining hours
Cost Allocation Rate = $900,000 / 30,000
Cost Allocation Rate = $30.00 per preparation hour
Packaging:
Overhead Cost = $300,000
Number of units packed = 6,000,000
Cost Allocation Rate = Overhead Cost / Number of units packed
Cost Allocation Rate = $300,000 / 6,000,000
Cost Allocation Rate = $0.05 per unit packed