Revising a time-driven activity-based cost system, adding products Refer to the Madison Dairy ice cream plant example described in this chapter. Required
(a) Suppose that production-related computer resource expenses of $18,000 per month have been inadvertently overlooked for inclusion in the cost system. Explain how the time-driven ABC model should be updated to reflect this cost.
(b) Suppose that energy costs of $4,000 per month to run the machinery have also been inadvertently overlooked for inclusion in the cost system. How should the activity-based cost model be updated to include this cost, and what will be the effect on the machine hour rate?
(c) If the company wishes to introduce a new flavor, what information is needed in order to determine the cost of producing this new flavor?