Sweetheart Brands packages single-sized servings of sugar and sugar substitute for fast-food restaurants. The activities required to package sugar are fewer and less complex than for the sugar substitute. The direct costs of producing the two products are as follows: Direct materials Direct labor Activity Setup Packing Inspection Overhead is currently assigned to the two products based on machine hours. The following information is provided regarding overhead costs: Traceable Costs $ 60,000 222,000 18,000 $ 300,000 Sugar $ 0.02 0.04 Sugar Substitute $0.04 0.08 Cost Driver Number of setups Number of machine hours Number of batches. Required A Required B Sugar Line 120 12,000 250 Complete this question by entering your answers in the tabs below. Required C Required: a. Compute the predetermined overhead rate under the current method of overhead cost allocation. How much total overhead cost will be assigned to each product under the current system? b. Compute the three activity rates that would be used in an activity-based system. How much total overhead cost will be assigned to each product under an ABC system? c. Assuming an ABC system to be more precise, by how much does the company's current costing system over- or undercost the products? Sugar Substitute Line 120 48,000 350 < Required A Total 240 60,000 600 Required B > Compute the predetermined overhead rate under the current method of overhead cost allocation. How much total overhead cost will be assigned to each product under the current system? Note: Round your "Predetermined overhead rate" answer to 2 decimal places. Predetermined overhead rate per machine hour Sugar Sugar Substitute
Sweetheart Brands packages single-sized servings of sugar and sugar substitute for fast-food restaurants. The activities required to package sugar are fewer and less complex than for the sugar substitute. The direct costs of producing the two products are as follows: Direct materials Direct labor Activity Setup Packing Inspection Overhead is currently assigned to the two products based on machine hours. The following information is provided regarding overhead costs: Traceable Costs $ 60,000 222,000 18,000 $ 300,000 Sugar $ 0.02 0.04 Sugar Substitute $0.04 0.08 Cost Driver Number of setups Number of machine hours Number of batches. Required A Required B Sugar Line 120 12,000 250 Complete this question by entering your answers in the tabs below. Required C Required: a. Compute the predetermined overhead rate under the current method of overhead cost allocation. How much total overhead cost will be assigned to each product under the current system? b. Compute the three activity rates that would be used in an activity-based system. How much total overhead cost will be assigned to each product under an ABC system? c. Assuming an ABC system to be more precise, by how much does the company's current costing system over- or undercost the products? Sugar Substitute Line 120 48,000 350 < Required A Total 240 60,000 600 Required B > Compute the predetermined overhead rate under the current method of overhead cost allocation. How much total overhead cost will be assigned to each product under the current system? Note: Round your "Predetermined overhead rate" answer to 2 decimal places. Predetermined overhead rate per machine hour Sugar Sugar Substitute
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Sweetheart Brands packages single-sized servings of sugar and sugar substitute for fast-food restaurants. The activities required to
package sugar are fewer and less complex than for the sugar substitute. The direct costs of producing the two products are as follows:
Direct materials
Direct labor
Activity
Setup
Packing
Inspection
Overhead is currently assigned to the two products based on machine hours. The following information is provided regarding
overhead costs:
Traceable
Costs
$ 60,000
222,000
18,000
$ 300,000
Sugar
$ 0.02
0.04
Sugar
Substitute
$ 0.04
0.08
Predetermined overhead rate
Sugar
Sugar Substitute
Cost Driver
Number of setups
Number of machine hours
Number of batches
Complete this question by entering your answers in the tabs below.
Required C
Sugar Line
120
12,000
250
Required:
a. Compute the predetermined overhead rate under the current method of overhead cost allocation. How much total overhead cost
will be assigned to each product under the current system?
b. Compute the three activity rates that would be used in an activity-based system. How much total overhead cost will be assigned to
each product under an ABC system?
c. Assuming an ABC system to be more precise, by how much does the company's current costing system over- or undercost the
products?
Required A Required B
Compute the predetermined overhead rate under the current method of overhead cost allocation. How much total
overhead cost will be assigned to each product under the current system?
Note: Round your "Predetermined overhead rate" answer to 2 decimal places.
per machine hour
< Required A
Sugar
Substitute
Line
120
48,000
350
Required B
Total
240
60,000
600
>
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