Reference: 17_05
Assume That a Pet Food Manufacturer Is Considering

question 10

Multiple Choice

Reference: 17_05
Assume that a pet food manufacturer is considering adding two types of pet food to its existing product line. Research had determined that good demand exists for dog food in 40-pound bags and cat food in 1/2pound cans.
The company identified the following partial list of activities, costs, and activity drivers expected for the next year:
$$\begin{array} { | l | c | l | } \hline \text { Activity } & \text { Expected Costs } & { \text { Cost Driver } } \\\hline \text { Handling materials } & \$ 105,000 & \text { Number of batches made } \\\hline \text { Storage costs } & \$ 820,000 & \text { Weight of Finished product } \\\hline\end{array}$$ $$\begin{array} { | l | c | c | } \hline & \text { Dog Food } & \text { Cat Food } \\\hline \text { Production volume } & 100,000\text { units } & 200,000 \text { units } \\\hline \text { Batches made } & \text { 200 batches } & 150 \text { batches } \\\hline\end{array}$$
-Refer to the data above.What are the overhead rates used to apply material handling (MH) and storage costs (SC) using activity-based costing?

• A) MH $300/batch; SC $2.73/unit.
• B) MH $300/batch; SC $.20/lb.
• C) MH $525/batch; SC $.205/unit.
• D) MH $700/batch; SC $.205/lb.
• E) MH $700/batch; SC $8.20/lb.

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Definitions:

Economists

Professionals who study, develop, and apply theories and concepts from economics to analyze how societies use resources to produce and distribute goods and services.

Broad Generalizations

Sweeping statements or conclusions that apply to a large group of people or situations, often oversimplifying complex issues.

Scientific Method

A systematic and empirical approach to research in which a problem is identified, hypotheses are formulated, experiments or observations are conducted, and conclusions are drawn.

Ice Cream

A frozen dessert made from dairy products, sweeteners, and flavorings, enjoyed as a treat or snack.