BevArt has been in operations for three years now and is having difficulty understanding the...
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BevArt has been in operations for three years now and is having difficulty understanding the cost of the four beverage related products that they make. The company has a shared manufacturing overhead cost per quarter of $345,000, but is unsure of how to allocate it. The direct costs (direct material and direct labor) are easily traceable to each product and the information for the last quarter has been collected. A team at BevArt has worked together to identify four possible cost drivers (units, batches, machine hours, direct labor hours) for the shared overhead cost. This information has also been collected for the last quarter and presented in the table below. The team is ready for you help in allocating the overhead cost in order to determine the cost of each of the four products that BevArt produces.
Product Name
Direct Material
Direct Labor
Units
# of Batches
Machine Hours
Direct Labor Hours
NO246
$142,000
$31,500
3000
5
4,100
2,100
AR478
$138,000
$36,750
7000
10
4,000
2,450
LM213
$137,000
$41,250
4000
8
5,500
2,750
RY780
$128,900
$43,500
8750
15
7,250
2,900
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