Nature Made Snacks produces different styles of sweet potato chips (ruffled, flat, thick cut, gourmet) for different
Nature Made Snacks produces different styles of sweet potato chips (ruffled, flat, thick cut, gourmet) for different corporate customers. Each style of sweet potato chip requires different preparation time, different cooking and draining times (depending on desired fat content), and different packaging (single serving versus bulk). Therefore, Nature Made has decided to try ABC to better capture the manufacturing overhead costs incurred by each style of chip. Nature Made has identified the following activities related to yearly manufacturing overhead costs and cost drivers associated with producing sweet potato chips:
Compute the activity cost allocation rates for each activity assuming the following total estimated activity for the year: 8,500 preparation hours, 32,000 cooking and draining hours, and 4 million packages.
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Manufacturing Cost Driver Preparation time Cooking and draining time Units packaged Activity Preparation Cooking and draining Overhead $510,000 $928,000 Packaging. $400,000
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