Cullumber Corporation produces two grades of non-alcoholic wine from grapes that it buys from California growers....

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Cullumber Corporation produces two grades of non-alcoholic wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600,000 5-liter jugs. Cullumber also produces and sells roughly 300,000 liters per year of a low-volume, high-cost product called LiteMist. LiteMist is sold in 1-liter bottles. Based on recent data, the CoolDay product has not been as profitable as LiteMist. Management is considering dropping the inexpensive CoolDay line so it can focus more attention on the LiteMist product. The LiteMist product already demands considerably more attention than the CoolDay line. Jack Eller, president and founder of Cullumber, is skeptical about this idea. He points out that for many decades the company produced only the CoolDay line and that it was always quite profitable. It wasn't until the company started producing the more complicated LiteMist wine that the profitability of Cool Day declined. Prior to the introduction of LiteMist, the company had basic equipment, simple growing and production procedures, and virtually no need for quality control. Because LiteMist is bottled in 1-liter bottles, it requires considerably more time and effort, both to bottle and to label and box than does CoolDay. The company must bottle and handle 5 times as many bottles of LiteMist to sell the same quantity as CoolDay. Cool Day requires 1 month of aging; LiteMist requires 1 year. CoolDay requires cleaning and inspection of equipment every 10,000 liters; LiteMist requires such maintenance every 600 liters. Jack has asked the accounting department to prepare an analysis of the cost per liter using the traditional costing approach and using activity-based costing. The following information was collected. CoolDay LiteMist Direct materials per liter $0.40 $1.20 Direct labor cost per liter $0.50 $0.90 Direct labor hours per liter 0.05 0.12 Total direct labor hours 150,000 36,000 Estimated Use of Cost Drivers per Product Activity Cost Pools Cost Drivers Estimated Overhead Estimated Use of Cost Drivers CoolDay LiteMist Grape processing Cart of grapes $162,360 6,600 6,000 600 Aging Total months 541,200 6,600,000 3,000,000 3,600,000 Bottling and corking Number of bottles 297,000 900,000 600,000 300,000 Labeling and boxing Number of bottles 206,100 900,000 600,000 300,000 Maintain and inspect equipment Number of 244,000 800 350 450 inspections Answer each of the following questions. (a) Your answer is correct. $1,450,660 Under traditional product costing using direct labor hours, compute the total manufacturing cost per liter of both products. (Round answers to 3 decimal places, e.g. 12.250.) (b) Manufacturing cost per liter $ eTextbook and Media CoolDay 1.290 $ LiteMist 3.036 Attempts: 2 of 2 used Under ABC, prepare a schedule showing the computation of the activity-based overhead rates (per cost driver). (Round overhead rates to 3 decimal places, e.g. 12.250.) Activity Cost Pools Estimated Overhead Estimated Use of Cost Drivers Activity-Based Overhead Rates Grape processing $ $ per cart Aging $ per month Bottling and corking $ per bottle Labeling and boxing $ per bottle Maintain and inspect $ equipment per inspection Cullumber Corporation produces two grades of non-alcoholic wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600,000 5-liter jugs. Cullumber also produces and sells roughly 300,000 liters per year of a low-volume, high-cost product called LiteMist. LiteMist is sold in 1-liter bottles. Based on recent data, the CoolDay product has not been as profitable as LiteMist. Management is considering dropping the inexpensive CoolDay line so it can focus more attention on the LiteMist product. The LiteMist product already demands considerably more attention than the CoolDay line. Jack Eller, president and founder of Cullumber, is skeptical about this idea. He points out that for many decades the company produced only the CoolDay line and that it was always quite profitable. It wasn't until the company started producing the more complicated LiteMist wine that the profitability of Cool Day declined. Prior to the introduction of LiteMist, the company had basic equipment, simple growing and production procedures, and virtually no need for quality control. Because LiteMist is bottled in 1-liter bottles, it requires considerably more time and effort, both to bottle and to label and box than does CoolDay. The company must bottle and handle 5 times as many bottles of LiteMist to sell the same quantity as CoolDay. Cool Day requires 1 month of aging; LiteMist requires 1 year. CoolDay requires cleaning and inspection of equipment every 10,000 liters; LiteMist requires such maintenance every 600 liters. Jack has asked the accounting department to prepare an analysis of the cost per liter using the traditional costing approach and using activity-based costing. The following information was collected. CoolDay LiteMist Direct materials per liter $0.40 $1.20 Direct labor cost per liter $0.50 $0.90 Direct labor hours per liter 0.05 0.12 Total direct labor hours 150,000 36,000 Estimated Use of Cost Drivers per Product Activity Cost Pools Cost Drivers Estimated Overhead Estimated Use of Cost Drivers CoolDay LiteMist Grape processing Cart of grapes $162,360 6,600 6,000 600 Aging Total months 541,200 6,600,000 3,000,000 3,600,000 Bottling and corking Number of bottles 297,000 900,000 600,000 300,000 Labeling and boxing Number of bottles 206,100 900,000 600,000 300,000 Maintain and inspect equipment Number of 244,000 800 350 450 inspections Answer each of the following questions. (a) Your answer is correct. $1,450,660 Under traditional product costing using direct labor hours, compute the total manufacturing cost per liter of both products. (Round answers to 3 decimal places, e.g. 12.250.) (b) Manufacturing cost per liter $ eTextbook and Media CoolDay 1.290 $ LiteMist 3.036 Attempts: 2 of 2 used Under ABC, prepare a schedule showing the computation of the activity-based overhead rates (per cost driver). (Round overhead rates to 3 decimal places, e.g. 12.250.) Activity Cost Pools Estimated Overhead Estimated Use of Cost Drivers Activity-Based Overhead Rates Grape processing $ $ per cart Aging $ per month Bottling and corking $ per bottle Labeling and boxing $ per bottle Maintain and inspect $ equipment per inspection