The FSOJ Company Undertakes the Following Activities in Its Production

question 68

Multiple Choice

The FSOJ Company undertakes the following activities in its production operation and incurred the following costs during the first half of 2010: 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 2010. Each product requires a different set up on the processing machines, so FSOJ 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 icey-poles during the last week of each month.
During the first half of 2010, 20% of the oranges harvested were turned into orange juice concentrate, 50% were processed into orange juice, and 30% became orange icey-poles. The relative sales values of each product were: 75% for orange juice, 20% for orange juice concentrate, and 5% for icey-poles. The orange juice concentrate operation takes up 40% of FSOJ's total factory space. Regular orange juice and orange icey-poles 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) $7,500 each to orange juice concentrate and orange icey-poles, and $15,000 to orange juice
• C) $10,000 to each product line
• D) None of the above

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