Using the data in the exhibits, determine the conversion cost of a 100-unit batch of BW-18 beeswax candle, a month's production of spare candles for inventory, and a month's work done for other divisions under the present model, Bright's first proposal, and his revised proposal.. Assume that direct materials cost for a 100-unit batch of BW-18 beeswax candle is $2,200 and that Nature Candle sells these candles at $46 each. Using both the present and first proposed costing methods, advise if the BW-18 price should be increased? Should it be dropped from the product line?

Comment on the cost differences you observe in question one and two between the different costing approaches. What causes the differences? Are they significant enough to cause a revision of the costing system? Explain your answer

Exhibit 1: Calculation of Plantwide Labour and Overhead Hourly Rate for October Labour Dollars Wick making $40,873 Wax melting 28,760 Molding 143,899 Custom work 61,137 Packing m Total labour 493,307 Overhead M Total labour and overhead 1,317,799 Hourly Rate = $1,317,799/31,412 = $41.95 per hour (= $15.70 labour + $26.25 overhead) Hours 2,527 2,138 7,678 3,712 31,412 Exhibit 2: Proposed Departmental Labour and Overhead Hourly Rates Department Wick making Wax melting Molding Custom work Packing Labour Rate Overhead per Hour per Hour $20.10 $23.53 18.50 22.61 19.75 46.89 23.10 30.36 15.00 15.89 Total Cost per Hour $43.63 41.11 66.64 53.46 30.89 Exhibit 3: Direct Labour Hour Distribution for Three MCT's Activities Department Wick making Wax melting Molding Custom work Packing Total BWlS Beeswax Spare Candles Candles (per Batch for Inventory of 100) (per Month) 8 hours 122 hours 5 hours 108 hours 23 hours 446 hours 14 hours - 50 hours 676 hours Work for Other Divisions (per Month) 270 hours 216 hours 863 hours 1,349 hours Exhibit 4: Departmental Overhead Rates Based on Normal Volume Normal Volume Department (DLI-I) Wick making 2,500 Wax melting 2,400 Molding 8,000 Custom work 3,600 Packing M Total 34,000 Normal Overhead Overhead Cost* $59,100 51,750 369,000 110,865 m 855,053 (per DLI-I) $23.64 21.56 46.13 30.30 E 25.15 * Estimated overhead cost if each department operates at its normal volume