Rising Sun, Inc Rising Sun's Total Expected Overhead Costs and Related Overhead Data

question 26

Essay

Rising Sun, Inc.produces granola that requires two processes, mixing and baking, to complete.The best-selling type of granola is cherry almond delight.Information related to the 100,000 units of cherry almond delight produced annually is shown in the following table:
$\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 230,000 \\\hline \text { Direct labor } & \\\hline \text { Mixing Department (600 DLH x \$24 per DLH) } & \$ 14,400 \\\hline \text { Baking Department (400 DLH x \$22 per DLH) } & \$ 8,800 \\\hline \text { Machine hours } & \\\hline \text { Mixing Department } & 200 \mathrm { MH } \\\hline \text { Baking Department } & 300 \mathrm { MH } \\\hline\end{array}$
Rising Sun's total expected overhead costs and related overhead data are shown below.The company uses departmental overhead rates based on machine hours in the mixing department and direct labor hours in the baking department.
$$\begin{array} { | l | r | r | } \hline & { \begin{array} { c } \text { Mixing } \\\text { Departrnent }\end{array} } & \begin{array} { c } \text { Baking } \\\text { Departnent }\end{array} \\\hline \text { Direct labor hours } & 11,000 \mathrm { DLH } & 5,000 \mathrm { DLH } \\\hline \text { Machine hours } & 4,000 \mathrm { MH } & \mathbf { 3 , 0 0 0 \mathrm { MH } } \\\hline \begin{array} { l } \text { Marufacturing overhead } \\\text { costs }\end{array} & \$ 80,000 & \$ 12,500 \\\hline\end{array}$$ Determine the total product cost of this product line and each unit of cherry almond delight.

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Definitions:

Average Total Cost

The sum of all production expenses (both constant and fluctuating) divided by the overall output quantity.

Perfect Competition

A market structure characterized by a large number of small firms, similar products, and free entry and exit, leading to price takers.

Perfect Competitor

A theoretical market structure where many firms sell identical products, no single firm can influence the market price, and all possess perfect market information.

Average Costs

The total cost of production divided by the number of goods produced, often used to assess cost efficiency.