Best Brew Corporation

Regular Extra rich

Direct materials (lbs) 225000 110000
Direct Labor (hrs) 45000 65000
Machine hours 36000 24000
Number of setups 1450 2375
Number of gallons produced 450000 90000
Overhead production cost

A. If best Brew Corporation applies factory overhead using direct labor hours, compute the total production cost and the un
Regular Extra rich
Direct materials (lbs) 506250 247500
Direct Labor (hrs) 945000 1365000
Overhead production cost 904960.227272727 1307164.77272727
Total Production Cost 2356210.22727273 2919664.77272727
Gallons produced 450000 90000
Cost per unit 5.2360227273 32.440719697

B. If Best Bew Corporation applies factory overhead using machine hours, compute the total production cost and the unit c
Regular Extra rich
Direct materials (lbs) 506250 247500
Direct Labor (hrs) 945000 1365000
Overhead production cost 1327275 884850
Total Production Cost 2778525 2497350
Gallons produced 450000 90000
Cost per unit 6.1745 27.7483333333

C. Assume that Best Brew Corporation has established the following activity centers, cost drivers, and costs to apply factory
Cost pool Cost driver Cost
Equipment maintenance Machine hours 450000
Production setup # of setups 248625
Materials handling Direct materials 703500
Storage costs # of gallons produced 810000

Compute the total cost and the unit cost for each brand
Regular Extra rich
Direct Materials 506250 247500
Direct Labor 945000 1365000
Overhead
Equipment maintenance 270000 180000
Production setup 94250 154375
Materials handling 472500 231000
Storage costs 675000 135000
Total Production cost 2963000 2312875
Gallons produced 450000 90000
Cost per unit 6.5844444444 25.6986111111
D. Explain why the unit cost for each model is different across the three methods of overhead application. How can this info

The unit cost for each model is different across the three methods of overhead application because each of which us
overhead production cost. For instance, when allocating overhead cost using volume-based cost drivers, it assigns mo
and does not consider the overheads incurred in the production. However, in the last method, where the overhead w
more relevant and accurate allocation of overhead cost was computed. With accurate cost, a company can establish a
cost, hence, a company could use it for strategizing the sale of a product.
 Total Cost
753750
21

2212125

s, compute the total production cost and the unit cost for each brand.

ompute the total production cost and the unit cost for each brand

y centers, cost drivers, and costs to apply factory overhead:

Volume
60000
3825
335000
540000
thods of overhead application. How can this information benefit the organization?

overhead application because each of which uses different cost drivers when computing for
st using volume-based cost drivers, it assigns more overhead to products which has more volume
wever, in the last method, where the overhead was broken down to show individual cost driver, a
d. With accurate cost, a company can establish a selling price per unit that will not be lower than
uct.
e