Best Brew Corporation manufactures two brands of beer: Regular and Extra Rich.

Below is the current year production data for the company:

Regular Extra Rich

Direct Materials in pounds 225,000 110,000
Direct Labor hrs. 45,000 65,000
Machine hrs. 36,000 24,000
No. of setups 1,450 2,375
No. of gallons produced 450,000 90,000

The 335,000 pounds of material had a total cost of $753,750.

Direct labor is $21 per hour.
The company has total overhead production costs of $2,212,125.

1. If Best Brew Corporation applies factory overhead using direct labor hours,
compute the total production cost and the unit cost for each brand.

2. If Best Brew Corporation applies factory overhead using machine hours,

compute the total production cost and the unit cost for each brand.

3. Assume that Best Brew Corporation has established the following

activity centers, cost drivers, and costs to apply factory overhead.

Cost Pool Cost Driver Cost

Equip. Maintenance No. of machine hours $450,000
Production Setup No. of Setups $248,625
Materials Handling Pounds of materials $703,500
Storage cost No. of gallons produced $810,000

Compute the total cost and the unit cost for each brand.

4. Explain which is the best method for overhead allocation for Best Brew and why.

1.) Regular Extra Rich

Direct materials $ 506,250.00 $ 247,500.00
Direct labor $ 945,000.00 $1,365,000.00
Overhead (20.11) $ 904,950.00 $1,307,150.00
Total cost $ 2,356,200.00 $2,919,650.00
No. of gallons 450,000.00 90,000.00
Cost per Gallon $ 5.24 $ 32.44
2.) Regular Extra Rich
Direct materials $ 506,250.00 $ 247,500.00
Direct labor $ 945,000.00 $1,365,000.00
Overhead (36.87) $ 1,327,320.00 $ 884,880.00
Total cost $ 2,778,570.00 $2,497,380.00
No. of gallons 450,000.00 90,000.00
Cost per Gallon $ 6.17 $ 27.75

3.) Regular Extra Rich

Direct materials $ 506,250.00 $ 247,500.00
Direct labor $ 945,000.00 $1,365,000.00
Overhead (7.50) $ 270,000.00 $ 180,000.00
Overhead (65.00) $ 94,250.00 $ 154,375.00
Overhead (2.10) $ 472,500.00 $ 231,000.00
Overhead (1.50) $ 675,000.00 $ 135,000.00
Total cost $ 2,963,000.00 $2,312,875.00
Gallons 450,000.00 90,000.00
Cost per Gal. $ 6.58 $ 25.70

4.) Activity center method is the best method for overhead allocation for Best Brew because
it rules out as much error as possible from overapplying overhead on a machine hour or labor hour heavy pr
Volume
60,000
3,825
335,000
540,000
Brew because
hine hour or labor hour heavy process