INSTRUCTIONS: prepare a schedule, assigning each activities, overhead cost pool to each product based on the use of cost drivers. Include a computation of overhead cost per liter.

$($

Round overhead rate, cost per liter to three decimal places, e

$.$

g

$12\mathrm{.}250$

$$and cost assigned to

$0$

$$decimal places, e

$.$

g

$.$

$12$

$,$

$250)$

$.$

$$

Benton corporation produces two grades of nonalcoholic 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

$600$

$,$

$0005$

$$liter jugs Benton also produces and sells roughly

$300$

$,$

$000$

$$liters per year of a low 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 we can focus more attention on the LiteMist product. The LiteMist product already demand considerably more attention than the CoolDay line.

Jack Eller, President, and founder of Benton, is skeptical about this idea he points out that for many decades, the company produced only the CoolDay line, and that it was quite profitable. It wasn

$$

t until the company started producing the more complicated LiteMist wine that the profitability of CoolDay 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 label and box than does CoolDay. The company must bottle and handle five times as many bottles of LiteMist to sell the same quantity as CoolDay. CoolDay requires one month of aging.; LiteMist requires one 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 act activity based costing the following information was collected:Estimated Use of Cost

Drivers per ProductEstimated Use of Cost

Drivers per Product