Maloney Pharmaceuticals manufactures an over-the-counter allergy medication called Breathe and is trying to win market share from
Question:
The commercial-container Breathe product line had a total weight of 8,200 kilograms, used 1,200 machine hours, and required 270 samples. The travel-pack line had a total weight of 6,500 kg, used 400 machine hours, and required 370 samples. Maloney produced 2,700 commercial containers of Breathe and 40,000 travel packs.
Requirements
1. Compute the cost allocation rate for each activity.
2. Use the activity-based cost allocation rates to compute the indirect cost of each unit of the commercial containers and the travel packs. (Hint: Compute the total activity costs allocated to each product line and then compute the cost per unit.)
3. Maloney Pharmaceuticals original single-allocation-based cost system allocated indirect costs to products at $350 per machine hour. Compute the total indirect costs allocated to the commercial containers and to the travel packs under the original system. Then, compute the indirect cost per unit for each product.
4. Compare the activity-based costs per unit to the costs from the simpler original system. How have the unit costs changed? Explain why the costs changed as they did.
Step by Step Answer:
Managerial Accounting
ISBN: 978-0176223311
1st Canadian Edition
Authors: Karen Wilken Braun, Wendy Tietz, Walter Harrison, Rhonda Pyp