CoolDay LiteMist

Direct materials per liter $0.40 $1.20

Direct labor cost per liter $0.25 $0.50

Direct labor hours per liter 0.05 0.09

Total direct labor hours 120,000 25,000

Activity Cost Pools Cost Drivers Estimated Overhead Expected Use of Cost Drivers Expected Use of Cost Drivers per Product

CoolDay LiteMist

Grape processing Cart of grapes $ 145,860 6,600 6,000 600

Aging Total months 396,000 6,600,000 3,000,000 3,600,000

Bottling and corking Number of bottles 270,000 900,000 600,000 300,000

Labeling and boxing Number of bottles 189,000 900,000 600,000 300,000

Maintain and inspect equipment Number of inspections 240,800 800 350 450


Answer each of the following questions. (Round all calculations to three decimal places.)

1. Under traditional product costing using direct labor hours, compute the total manufacturing cost per liter of both products.

(a) Cost/liter”C.D. $1.078

Under ABC, prepare a schedule showing the computation of the activity-based overhead rates (per cost driver).

Prepare a schedule assigning each activity’s overhead cost pool to each product, based on the use of cost drivers. Include a computation of overhead cost per liter.

(c) Cost/liter”C.D. $.241

Compute the total manufacturing cost per liter for both products under ABC.