Question

The raw shrimp are chilled and then cut. For headless shrimp, employees remove the heads and then rinse the shrimp. For peeled and deveined

shrimp, the headless shrimp are further processed: The shells are removed, and the backs are slit for deveining. Both headless shrimp and peel
and deveined shrimp are packaged in foam trays and covered with shrink wrap. Order-filling personnel assemble orders of headless shrimp as
well as peeled and deveined shrimp.
Barefield estimates that Bronson will produce 10,000 packages of headless shrimp and 50,000 packages of peeled and deveined shrimp in 20X
The two products incur the following costs and activities per package:
Shrimp
Foam trays
Shrink wrap
Number of cuts
Cubic feet of exposed surface
Weight
Direct labor hours
Costs and Activities per Package
Headless Shrimp Peeled and Deveined Shrimp
4.50
0.05
0.02
Design changes
Batches
Sales orders
3.50
0.05
0.05
1 cut
1 cubic foot
2.5 pounds
0.01 hour
3 cuts
0.75 cubic foot
1 pound
0.05 hour
Bronson pays direct laborers $20 per hour. Barefield estimates that each product line also will require the following total resources:
Peeled and Deveined Shrimp (for
all 50,000 packages)
Headless Shrimp (for all
10,000 packages)
1 change
40 batches
4 changes
20 batches
110 orders
90 orders
Requirements
Using the original costing system with the single indirect cost allocation base (direct labor hours), compute the total budgeted cost per
package for the headless shrimp and then for the peeled and deveined shrimp. Round to two decimal places. (Hint: First, compute the
predetermined overhead allocation rate. Then compute the total budgeted cost per package for each product.)

Answer 1

To compute the total budgeted cost per package for the headless shrimp and peeled and deveined shrimp using the original costing system, we need to follow these steps:

Step 1: Compute the predetermined overhead allocation rate:

Total estimated overhead cost / Total estimated direct labor hours

Total estimated overhead cost:

For headless shrimp: $4.50 (foam trays) + $0.05 (shrink wrap) = $4.55

For peeled and deveined shrimp: $3.50 (foam trays) + $0.05 (shrink wrap) = $3.55

Total estimated direct labor hours:

For headless shrimp: 10,000 packages * 0.01 hour = 100 hours

For peeled and deveined shrimp: 50,000 packages * 0.05 hour = 2,500 hours

Predetermined overhead allocation rate:

For headless shrimp: $4.55 / 100 hours = $0.0455 per direct labor hour

For peeled and deveined shrimp: $3.55 / 2,500 hours = $0.00142 per direct labor hour

Step 2: Compute the total budgeted cost per package for each product:

Total budgeted cost per package = Direct materials cost + Direct labor cost + Overhead cost

Headless Shrimp:

Direct materials cost: $0.02 (number of cuts) + $0.02 (cubic feet of exposed surface) + $0.02 (weight) = $0.06

Direct labor cost: $20 (direct labor hours) = $20

Overhead cost: $0.0455 (predetermined overhead allocation rate) * 0.01 (direct labor hours) = $0.000455

Total budgeted cost per package for headless shrimp = $0.06 + $20 + $0.000455 = $20.060455

Peeled and Deveined Shrimp:

Direct materials cost: $0.05 (number of cuts) + $0.05 (cubic feet of exposed surface) + $0.05 (weight) = $0.15

Direct labor cost: $20 (direct labor hours) = $20

Overhead cost: $0.00142 (predetermined overhead allocation rate) * 0.05 (direct labor hours) = $0.000071

Total budgeted cost per package for peeled and deveined shrimp = $0.15 + $20 + $0.000071 = $20.150071

Rounded to two decimal places:

Total budgeted cost per package for headless shrimp = $20.06

Total budgeted cost per package for peeled and deveined shrimp = $20.15