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 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:
Their MOH is comprised of the following costs:
What is the ABC-based total MOH cost allocated per unit for Rocky Road ice cream? (If required, round calculations to two decimal places.)
A) $0.64
B) $1.22
C) $1.36
D) $1.37

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 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:
 Their MOH is comprised of the following costs:
 What is the ABC-based total MOH cost allocated per unit for Rocky Road ice cream? (If required, round calculations to two decimal places.)
A) $0.64 
B) $1.22 
C) $1.36 
D) $1.37

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 Rocky Road ice cream pints: ($8.60 × 3,900 pounds) + ($7.51 × 2,570 hours) + ($2.74 × 3,600 inspections) + ($24.75 × 2,335 hours) = $33,540.00 + $19,300.70 + $9,864.00 + $57,791.25 = $120,495.95. Lastly, divide the total Rocky Road MOH cost by the number of Rocky Road pints produced: $120,495.95/88,430 = $1.36 per pint (Choice C).

Susan Is the Controller for Simply Devine Inc