Brewer’s Magic makes the basic yeast and flavoring packets for the home beer-brewing industry. It makes these products in large batches on a repetitive basis, so it has gotten to know quite a bit about the costs of the various ingredients and the costs to run the primary departments: Blending, Cubing, and Packaging. The following table details the costs of the three departments and other key data.

The vice president of manufacturing, Jane Sneed, wants to look at her current overhead rates. Direct labor currently makes $15 per hour. She provides you with the following details for three large batches the company currently makes monthly.

REQUIRED:

a. Using machine hours as the driver, develop an overhead rate and use it to charge overhead to the three batches. Do not forget to charge labor costs to each batch.

b. What is the cost per package made for each of the three batches?

c. Now develop four overhead rates, specifically use direct labor hours for general overhead, pounds made for blending, machine hours for cubing, and packages produced for packaging.

d. Re-cost the three batches using your four overhead rates. What does it now cost per package of output for each of the three products?

e. Which approach do you prefer? Why?

Transcribed Image Text:

Brewer's Magic Blending Cubing Packaging General Overhead Overhead $500,000 $300,000 $800,000 $400,000 Direct Iabor hours NA NA 6,000 2,000 12,000 Machine hours 12,000 6,000 8,000 Pounds made NA NA NA NA NA 1,000,000 Packages produced NA 8,000,000