Question

Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direct labor-hours at a rate of $3 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 1,000 gallons) follow:

Strawberry Vanilla Chocolate
Direct labor $755 $830 $1,130
Raw materials 805 505 605

Required:
If the number of hours of labor per 1,000 gallons is 56 for strawberry, 66 for vanilla and 100 for chocolate, compute the total cost of 1,000 gallons of each flavor using plant-wide allocation.

Answer 1

Results are below.

Step-by-step explanation:

First, we need to allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Strawberry= 3*56= 168

Vanilla= 3*66= 198

Chocolate= 3*100= 300

Now, the total cost for each product line:

Strawberry:

Total cost= 168 + 755 + 805= $1,728

Vanilla:

Total cost= 198 + 830 + 505= $1,533

Chocolate:

Total cost= 300 + 1,130 + 605= $2,035