Bugaboo Co Assume That Bugaboo Sells All the Boxes It Produces in Snaps

question 85

Essay

Bugaboo Co. manufactures three types of cookies: Fluffs, Crinkles, and Snaps. The production process is relatively simple, and factory overhead costs are allocated to products using a single plantwide factory rate based on direct labor hours. Information for the month of May, Bugaboo's first month of operations, follows: Bugaboo has budgeted direct labor costs for May at $8.50 per hour. Budgeted direct materials costs for May are: Fluffs, $0.75/unit; Crinkles $0.40/unit; and Snaps $0.30/unit.
Bugaboo's budgeted overhead costs for May are: $$\begin{array} { l r } \text { Indirect labor } & \$ 280,000 \\\text { Utilities } & 65,000 \\\text { Supplies } & 45,000 \\\text { Depreciation } & 30,000 \\\text { Total } & \$ 420,000\end{array}$$ Assume that Bugaboo sells all the boxes it produces in May.
a) Compute Bugaboo's plantwide factory overhead rate for May.
b) Compute the product cost in May for each type of cookie.
c) Does Bugaboo's use of a plantwide factory overhead rate in any way distort the product costs for May?

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Definitions:

Cash Flow From Assets

The total amount of money being transferred in and out of a business, particularly from operational, investing, and financing activities.

Shareholders' Equity

The ownership interest of shareholders in a company's assets, once all liabilities have been subtracted.

Net Working Capital

Net working capital is the difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of the company.

Net Fixed Assets

The value of all fixed assets in a company, such as property, plant, and equipment, after accounting for depreciation and amortization.