The FSOJ Company Undertakes the Following Activities in Its Production

question 30

Essay

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
In addition to the costs listed above, processing the juice into 3 final products involves the use of 2 machines, each of which incurred amortization costs of $10,000 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 using 80 machine hours. The machine is then set up to produce apple juice for the next 2 weeks using 160 machine hours. Finally, workers set up the same machines to produce apple cider during the last week of each month, using 80 machine hours.
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 apple juice concentrate operation takes up 40% of FSOJ's total factory space. Regular apple juice and apple cider occupy 35% and 25%, respectively.
a)Calculate the total costs included in the processing activity cost pool.
b)Choose a cost driver for the processing activity and explain your choice. Calculate the ABC allocation rate for this activity.
c)Allocate processing costs to each product line using the ABC allocation rate developed in part (b).

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Definitions:

Compounded Semi-Annually

Interest is calculated and added to the principal twice a year.

Monthly Payments

Recurring payments made once per month, often in the context of loan repayments or subscriptions.

Compounded Annually

Interest calculation method where interest is added to the principal at the end of each year, enabling interest to be earned on interest in the following year.

Monthly Payments

Regular payments made every month, typically in the context of repaying loans or paying for services.