Question

Karen is the controller for Crane Devine Inc., a company that produces ice cream and specializes in dairy-free versions of the Cookie Dough and Rocky Road flavors. Karen has recommended that Crane implement Activity-Based Costing (ABC) as they gear up to produce the following number of pints in the coming year: Cookie Dough, 96000 pints; and Rocky Road, 88000 pints. Karen believes that a traditional costing system has not been the most effective manner to allocate their Manufacturing Overhead (MOH) costs. She has compiled the following data about the usage of their company resources: Item Pounds of Ingredients Moved Cleaning/Maintenance Hours # of Inspections Supervisor Hours Cookie Dough 5100 4150 6000 2000 Rocky Road 4200 2500 3900 2300 Their MOH is comprised of the following costs: Moving and Sorting Ingredients $78000 (9300 pounds) Cleaning and Maintenance $46000 (6650 hours) Quality Control $27850 (9900 inspections) Supervisor Wages $109130 (4300 hours) What is the ABC-based total MOH cost allocated per unit for Rocky Road ice cream?

1) $1.19
2) $1.38
3) $1.39
4) $0.71

Answer 1

The ABC-based total MOH cost allocated per unit for Rocky Road ice cream is $1.49, which is not listed among the options provided.

Step-by-step explanation:

The ABC-based total MOH cost allocated per unit for Rocky Road ice cream can be calculated by dividing the total MOH cost for Rocky Road by the number of pints produced. Let's calculate:

Total MOH cost for Rocky Road = Cost of moving and sorting ingredients + Cost of cleaning and maintenance + Cost of quality control + Cost of supervisor wages = $78,000 + $46,000 + $27,850 + $109,130 = $261,980.

Total number of pints of Rocky Road produced = 88,000 pints.

ABC-based total MOH cost allocated per unit for Rocky Road = Total MOH cost for Rocky Road / Total number of pints of Rocky Road produced = $261,980 / 88,000 = $1.49.

Therefore, the correct answer is not listed among the options provided.