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53. Assume New Belgium Brewing Company manufactures and distributes three

Question : 53. Assume New Belgium Brewing Company manufactures and distributes three : 785

53. 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:

Blue Paddle

Cocoa Mole Ale

Cost data per unit:

Direct materials

$100,000

$500,000

$750,000

Direct labor

$3,600

$4,800

$6,000

Overhead

$12,000

$16,000

$20,000

Total product cost per unit

$115,600

$520,800

$776,000

Machine hours per unit

30 MH

40 MH

50 MH

Number of units produced per year

30 units

20 units

10 units

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?

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