Revising a time driven activity based cost system, adding products Refer to the Madison Dairy ice cream plant example described in this chapter.
Required
(a) Suppose that production related computer resource expenses of $18,000 per month have been inadvertently overlooked for inclusion in the cost system. Explain how the time driven ABC model should be updated to reflect this cost.
(b) Suppose that energy costs of $4,000 per month to run the machinery have also been inadvertently overlooked for inclusion in the cost system. How should the activity based cost model be updated to include this cost, and what will be the effect on the machine hour rate?
(c) If the company wishes to introduce a new flavor, what information is needed in order to determine the cost of producing this new flavor?
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