Susan is the controller for Simply Devine Inc., a company that produces ice cream and specializes in dairy-free versions of the Cookie Dough and Rocky Road flavors. Susan has recommended that Simply Devine implement Activity-Based Costing (ABC) as they gear up to produce the following number of pints in the coming year: Cookie Dough, 98,700 pints; and Rocky Road, 88,430 pints. Susan 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:
Problems 25 and 26 seem a little long for multiply choice questions.
As this is a Hard-level question, it requires the test-taker to do a more thorough look at the material.
Their MOH is comprised of the following costs:
What is the ABC-based total MOH cost allocated per unit for Cookie Dough ice cream? (If required, round calculations to two decimal places.)
A) $0.74
B) $1.40
C) $1.41
D) $1.56

Question

Susan is the controller for Simply Devine Inc., a company that produces ice cream and specializes in dairy-free versions of the Cookie Dough and Rocky Road flavors. Susan has recommended that Simply Devine implement Activity-Based Costing (ABC) as they gear up to produce the following number of pints in the coming year: Cookie Dough, 98,700 pints; and Rocky Road, 88,430 pints. Susan 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:
Problems 25 and 26 seem a little long for multiply choice questions.
As this is a Hard-level question, it requires the test-taker to do a more thorough look at the material.
 Their MOH is comprised of the following costs:
 What is the ABC-based total MOH cost allocated per unit for Cookie Dough ice cream? (If required, round calculations to two decimal places.)
A) $0.74 
B) $1.40 
C) $1.41 
D) $1.56

Quizplus · Accepted Answer

This question requires calculation of the activity rate for each of the MOH activities: Moving and Sorting Ingredients, $76,500/8,900 pounds = $8.60/pound; Cleaning/Maintenance Hours, $48,200/6,420 hours = $7.51/hour; Quality Control Inspections, $26,550/9,700 inspections = $2.74/inspection; and Supervisor Wages, $107,430/4,340 hours = $24.75 per hour. Next, calculate the total overall MOH cost for Cookie Dough ice cream pints: ($8.60 × 5,000 pounds) + ($7.51 × 3,850 hours) + ($2.74 × 6,100 inspections) + ($24.75 × 2,005 hours) = $43,000.00 + $28,913.50 + $16,714.00 + $49,623.75 = $138,251.25. Lastly, divide the total Cookie Dough MOH cost by the number of Cookie Dough pints to be produced: $138,251.25/98,700 = $1.40 per pint (Choice B).

Susan Is the Controller for Simply Devine Inc