The Supreme Juice Company Undertakes the Following Activities in Its

question 46

Multiple Choice

The Supreme Juice Company undertakes the following activities in its production operation and incurred the following costs during the first half of 2019:
$\begin{array}{llcc} \text { Harvest oranges} &\$25,000 \\ \text {Prepare oranges for processing } &20,000\\ \text { Extract juice from oranges } &18,000\\ \text { Process juice into orange juice concentrate, } &15,000\\ \text { orange juice or orange smoothies } &\\ \text {Package completed products } &9,000\\\end{array}$
Processing the juice into 3 final products involves the use of 2 machines, each of which incurred depreciation costs of $15,000 for the first half of 2019. Each product requires a different set up on the processing machines, so Supreme Juice normally sets up the machines to produce concentrate for the first week of each month. The machine is then set up to produce orange juice for the next 2 weeks. Finally, workers set up the same machines to produce orange smoothies during the last week of each month.
During the first half of 2019, 30% of the oranges harvested were turned into orange juice concentrate, 45% were processed into orange juice, and 25% became orange smoothies. The relative sales values of each product were: 5% for orange juice, 20% for orange juice concentrate, and 10% for smoothies. The orange juice concentrate operation takes up 40% of Supreme Juice's total factory space. Regular orange juice and orange smoothies occupy 35% and 25%, respectively.
Assume processing costs are allocated on the basis of number of machine setups. How much processing cost will be allocated to each product line?

• A) $5,000 to each product line
• B) $10,000 orange juice concentrate and $2,500 each to orange juice and smoothie
• C) $10,000 to each product line
• D) $6667 to each product line

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Definitions:

Supply Curve

A graphical representation showing the relationship between the price of a good or service and the quantity supplied.

Elasticity Coefficients

Numerical measures that indicate how much the quantity demanded or supplied of a good responds to changes in price, income, or other factors.

Total Revenue

The total income generated from the sale of goods or services before any expenses are subtracted.

Demand for Labor

The total amount of labor (number of workers or hours worked) that employers want to hire at various wage rates.