Gerbig Snacks produces different types of potato chips (ruffled, flat, thick cut, gourmet) for
different corporate customers. Each style of potato chip requires different preparation time,
different cooling and draining time, and different packaging. Gerbig has identified the following
activities related to yearly manufacturing of overhead costs and cost drivers:
Activity
Manufacturing overhead
Cost Driver
Preparation
$610,000
Preparation time
Cooking and Draining
$972,000
Cooking and draining
Time
Packaging
$320,000
Units packaged
a. Compute the activity cost allocations for each activity assuming the following total established
activity for the year: 10,000 preparation hours, 36,000 cooking and draining hours, 4 million
packages