The FSOJ Company Undertakes the Following Activities in Its Production

question 94

Multiple Choice

The FSOJ Company undertakes the following activities in its production operation and incurred the following costs during the first half of 20x2: Harvest apples $25,000
Prepare apples for processing 20,000
Extract juice from apples 18,000
Process juice into apple juice concentrate,
Apple juice or apple cider 30,000
Package completed products 9,000
Processing the juice into 3 final products involves the use of 2 machines, each of which incurred amortization costs of $15,000 for the first half of 20x2. 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 apple juice for the next 2 weeks. Finally, workers set up the same machines to produce apple cider during the last week of each month.
During the first half of 20x2, 20% of the apples harvested were turned into apple juice concentrate, 50% were processed into apple juice, and 30% became apple cider. The relative sales values of each product were: 75% for apple juice, 20% for apple juice concentrate, and 5% for apple cider. The apple juice concentrate operation takes up 40% of FSOJ's total factory space. Regular apple juice and apple cider occupy 35% and 25%, respectively.
Preparing apples for processing involves peeling and removing seeds. The best cost driver for the cost of preparing apples for processing would be:

• A)Square metres occupied by the preparation equipment
• B)Percent of apples harvested for each product line
• C)Direct labour hours
• D)Total direct costs

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Definitions:

Total Revenue

The total income generated by the sale of goods or services related to the company's primary operations.

Peak Efficiency

The point at which an operation or process achieves its maximum output with the lowest input, without waste or undue strain on resources.

Operate

To function or work in a specified manner.

Shut Down

A short-term decision by a firm to cease production due to unfavorable market conditions, with the possibility of resuming operations in the future.