Assume New Belgium Brewing Company Manufactures and Distributes Three Types

Essay

Assume New Belgium Brewing Company manufactures and distributes three types of beer and that estimated per unit product costs and related information for the next year are shown in the following table:
$$\begin{array} { | l | r | r | r | } \hline & \begin{array} { r } \text { Blue } \\\text { Paddle }\end{array} & \text { Somersault } & { \begin{array} { c } \text { Cocoa } \\\text { Mole Ale }\end{array} } \\\hline \text { Cost data per unit: } & & & \\\hline \text { Direct materials } & \$ 100,000 & \$ 500,000 & \$ 750,000 \\\hline \text { Direct labor } & \$ 3,600 & \$ 4,800 & \$ 6,000 \\\hline \text { Overhead } & \$ 12,000 & \$ 16,000 & \$ 20,000 \\\hline \text { Total product cost per unit } & \$ 115,600 & \$ 520,800 & \$ 776,000 \\\hline & & & \\\hline \text { Machine hours per unit } & 30 \mathrm { MH } & 40 \mathrm { MH } & 50 \mathrm { MH } \\\hline \text { Number of units produced per year } & 30 \text { units } &200 \text { units } & 10 \text { units } \\ \hline\end{array}$$
a.If New Belgium Brewing Company uses a plantwide overhead rate based on machine hours,what is the total product cost per unit of Cocoa Mole Ale?
b.Blue Paddle is a traditional brew made in large quantities with long production runs.Somersault is a seasonal beer made in small batches.Cocoa Mole Ale is a specialty beer also made in small batches.Which of the overhead allocation methods studied in this chapter would you recommend that New Belgium Brewing Company use and why?