Problem 1 – Aunt Ethel’s Fancy Cookie Company manufactures and sells three flavors of cookies: macaroon, sugar, and buttercream. The batch size for the cookies is limited to 1,000 cookies based on th

Problem 1 – Aunt Ethel’s Fancy Cookie Company manufactures and sells three flavors of cookies: macaroon, sugar, and buttercream. The batch size for the cookies is limited to 1,000 cookies based on the size of the ovens and cookie molds owned by the company. Based on budgetary projections, the information listed below is available:

Buttercream Macaroon Sugar

Projected sales in units 500,000 800,000 600,000

PER UNIT data:

Selling price \$0.80 \$0.75 \$0.60

Direct materials \$0.20 \$0.15 \$0.14

Direct labor \$0.04 \$0.02 \$0.02

Hours per 1,000-unit batch:

Direct labor hours 2 1 1

Oven hours 1 1 1

Packaging hours 0.5 0.5 0.5

Total overhead costs and activity levels for the year are estimated as follows:

Direct labor 2,400 hours

Oven \$120,000 1,900 hours

Packaging \$150,000 950 hours

Total \$270,000

Questions:

Determine the activity-cost-driver rate for packaging costs (three points).

Using the ABC system, for the sugar cookie, compute the estimated overhead costs per 1,000 cookies (three points).

Using the ABC system, for the sugar cookie, compute the estimated operating profit per 1,000 cookies (three points).