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Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direct labor-hours at a rate of $2 per labor-hour. Strawberry and vanilla flavors are produced in Department SV. Chocolate is produced in Department C. Sven manages Department SV and Charlene manages Department C. The product costs (per thousand gallons) follow.

Strawberry Vanilla Chocolate Direct labor (per 1,000 gallons) $ 760 $ 835 $ 1,135 Raw materials (per 1,000 gallons) 810 510 610

Required:

a. If the number of hours of labor per 1,000 gallons is 65 for strawberry, 70 for vanilla, and 150 for chocolate, compute the total cost of 1,000 gallons of each flavor using plantwide allocation.

b. Charlene's department uses older, outdated machines. She believes that her department is being allocated some of the overhead of Department SV, which recently bought state-of-the-art machines. After she requested that overhead costs be broken down by department, the following information was discovered:

Department SV Department C Overhead $ 80,960 $ 17,204 Machine-hours 25,300 37,000 Labor-hours 25,300 18,700

Using machine-hours as the department allocation base for Department SV and labor-hours as the department allocation base for Department C, compute the allocation rate for each.

c. Compute the cost of 1,000 gallons of each flavor of ice cream using the department allocation rates computed in requirement (b) if the number of machine-hours for 1,000 gallons of each of the three flavors of ice cream are as follows: strawberry, 65; vanilla, 70; and chocolate, 160. Direct labor-hours by product remain the same as in requirement (a).

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