Your company produces boxed cereal. There are three main processes used to make the cereal. The first process preps and shapes the corn into flakes. The second process bakes and seasons the corn flakes. The third process packages the cereal. The cereal sold in 24 oz boxes (1 box is a unit)

Information on the direct materials is listed in table 1. Consider this information the standard. Direct labor information given in Table 2. Consider this information the standard.

Annual overhead information is given in Table 3. Overhead is allocated based direct labor hours. Estimated annual direct labor hours are 20,000. Calculate a predetermined OH rate (round to two decimal places if needed). Use this rate when you need to apply OH.

Table 4 gives you the information for the last two months on the overhead cost. Use this information to determine the fixed and variable portions of the cost. (You will need this information to complete Table 5). Machine hours have been determined as the best cost driver for separating mixed cost into their fixed and variable portions. It takes approximately 10 minutes of total machine time for each cereal box (or 1/6 a machine hour per box of cereal).

Table 5 is where you will list all your production cost, separated into their fixed and variable components.

Cost-Volume-Profit (CVP) Relationships

Selling Price: You sell a box of cereal for $5.70

Breakeven point: Calculate the breakeven point. Be sure to include the fixed component of mixed cost in your fixed costs and the variable component in the variable cost. Show your breakeven in Sales units and in Sales Dollars

Profit Planning: Determine the number of units you must sell to make an annual pre-tax profit using 3 assumptions concerning your net income (profit), both in sales units and sales dollars

Aggressive Profit ($250,000)

Conservative Profit ($75,000)

Average Profit ($182,220)

Table 1: Direct Materials

Material	Quantity per unit	Cost	Total per unit
corn	3 lbs	$0.50	$1.50
seasoning	1 ounce	0.05	0.05
packaging	1 cardboard box	0.20	0.20
Total cost			$1.75

Table 2: Direct Labor

Job description	Hours per unit	Rate	Total cost
Processor	0.1	$10.50	$1.05
Baker	0.04	10.50	0.42
Packager	0.02	10.50	0.21
Total cost			$1.68

Table 3: YEARLY OVERHEAD COSTS

Cost description	Amount
Indirect material	$9,060
Indirect labor	60,000
Machine Maintenance	5,600
Electricity	8,400
Depreciation	7,200
Quality testing	6,740
Total	$97,000

Predetermined OH rate:

Table 4 – Actual Overhead cost for the last two months

	Month 1	Month 2
Indirect Material	$755	$755
Indirect Labor	5,000	5,000
Machine Maintenance	338	410
Electricity	504	630
Depreciation	600	600
Quality testing	428	500
Machine Hours *	1,200	1,500

*10 minutes of machine time per box of cereal (1/6 hour = 1 unit)

Complete any calculations here:

Table 5: Variable and Fixed Cost

COSTS Description VARIABLE Cost per unit FIXED Cost per Year

TOTAL

If a cost is mixed, put the fixed amount in the fixed column and the variable amount in the variable column.

CVP Calculations:

Answer rating: 100% (QA)

Predetermined overhead rate total overhead costsestimated labor hours 9700020000 485 Table 5 Monthly ... View the full answer