Bronson Case Study Analysis Solution
Part 1)To calculate the total cost per package, we need to determine the cost allocation rate as below:Cost Allocation Rate/Predetermined Overhead Rate = Estimated Total Indirect Costs/Estimated Total Direct Labor Hours = 40,125/(10,000*.01 + 50,000*.05) = $15.4327 per labor hourThe total budgeted cost per package is calculated as follows:Bronson Shrimp FarmsTotal Budgeted Cost Per Unit (Original Costing System)Headless ShrimpPeeled and Deveined ShrimpDirect Materials:Shrimp3.54.5Foam Trays0.050.05Shrink Wrap0.050.02Direct Labor0.2 (.01*20)1 (.05*20)Indirect Costs0.15 (.01*15.4327)0.77 (.05*15.4327)Total Cost Per Package$3.95$6.34_______
Part B)To calculate the total cost per package under activity based costing, we need to calculate the activity rates as follows:ActivityBudgeted Total Costs (A)Budgeted Total Activity (B)Activity Rate (A/B)Redesign of Production Process5,0005 (4+1)1,000per design changeProduction Scheduling6,00060 (40 + 20)100per batchChilling1,50075,000 (10,000*2.5 + 50,000*1)0.02per poundProcessing19,200160,000 (10,000*1 + 50,000*3)0.12per cutPackaging1,42547,500 (10,000*1 + 50,000*.75)0.03per cubic footOrder Filling7,000200 (90 + 110)35per orderThe total budgeted cost is calculated with the use of following table: