Evaluating product line costs and prices using ABC
Healthy Day Company produces two beverages, PowerPunch and SlimLife. Data about these products follow.
Production volume ............ 12,500 bottles 37,000 gallons
Liquid materials ....................... 1,400 gallons 12,000 pounds
Dry materials ................... 620 pounds 180.000 bottles
Bottles .................................... 12,500 bottles I label per bottle
Labels ..................................... 3 labels per bottle 300 setups
Machine setups ........................ 500 setups 3.750 MH
Machine hours ........................... 200 MH
Additional data from its two production departments follow:
1. Determine the cost of each product line using ABC.
2. What is the cost per bottle for PowerPunch? What is the cost per bottling of SlimLife?
(Hint: Your answer should draw on the total cost for each product line computed in requirement 1.)
3. If PowerPunch sells for $3.75 per bottle, how much profit does the company earn per bottle of PowerPunch that it sells?
4. What is the minimum price that the company should set per bottle of SlimLife? Explain.