Aunt Ethel's Fany ookie company manufactures and sells three flavors of ookies: maroon, sugar, and butter ream. The bath size for the ookies is limited to 1,000 ookies based on the size of the ovens and ookie molds owned by the company. Based on budgetary projections, the information listed below is available:
Total overhead osts and ativity levels for the year are estimated as follows:
Questions:
1. Determine the ativity-cost-driver rate for pakaging costs (three points).
2. Using the AB system, for the sugar ookie, compute the estimated overhead osts per 1,000 ookies (three points).
3. Using the AB system, for the sugar ookie, compute the estimated operating profit per 1,000 ookies (three points).
4. Using a traditional system (with diret labor hours as the overhead allocation base) for the sugar ookie, compute the estimated overhead osts per 1,000 ookies (three points).
5. Using a traditional system (with diret labor hours as the overhead allocation base) for the sugar ookie, compute the estimated operating profit per 1,000 ookies (3 points).
6. Explain the differene between the profits obtained from the traditional system and the AB system. Which system provides a better estimate of profitability? Why? (three points).
Problem 2: What is ativity-based management and how an it be used to improve the profitability of Company?