Main Street Ice Cream Company uses a plantwide allocation methodto allocate overhead based on direct labor-hours at a rate of $3per labor-hour. Strawberry and vanilla flavors are produced inDepartment SV. Chocolate is produced in Department C. Sven managesDepartment SV and Charlene manages Department C. The product costs(per thousand gallons) follow.
| Strawberry | Vanilla | Chocolate |
| Direct labor(per 1,000 gallons) | $ | 768 | | $ | 843 | | $ | 1,143 | |
| Raw materials(per 1,000 gallons) | | 818 | | | 518 | | | 618 | |
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Required:
a. If the number of hours of labor per 1,000gallons is 60 for strawberry, 70 for vanilla, and 100 forchocolate, compute the total cost of 1,000 gallons of each flavorusing plantwide allocation.
b. Charlene's department uses older, outdatedmachines. She believes that her department is being allocated someof the overhead of Department SV, which recently boughtstate-of-the-art machines. After she requested that overhead costsbe broken down by department, the following information wasdiscovered:
| Department SV | Department C |
| Overhead | $ | 93,906 | | $ | 38,665 | |
| Machine-hours | | 25,380 | | | 37,800 | |
| Labor-hours | | 25,380 | | | 18,500 | |
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Using machine-hours as the department allocation base forDepartment SV and labor-hours as the department allocation base forDepartment C, compute the allocation rate for each.
c. Compute the cost of 1,000 gallons of eachflavor of ice cream using the department allocation rates computedin requirement (b) if the number of machine-hours for1,000 gallons of each of the three flavors of ice cream are asfollows: strawberry, 60; vanilla, 70; and chocolate, 168. Directlabor-hours by product remain the same as in requirement(a).
Complete this question by entering your answers in thetabs below.
- Required A
- Required B
- Required C
If the number of hours of labor per 1,000 gallons is 60 forstrawberry, 70 for vanilla, and 100 for chocolate, compute thetotal cost of 1,000 gallons of each flavor using plantwideallocation.
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| | Total Cost | | Strawberry | | | Vanilla | | | Chocolate | |
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| | Total Cost | | Strawberry | | | Vanilla | | | Chocolate | |
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| | Allocation Rate | | Department SV | | per machinehour | | Department C | | per laborhour |
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