Bundaberg Sugar Company Ltd. - Conventional versus simple activity-based costing systems; strategic cost analysis: Bundaberg Sugar Company manufactures three products: < 1. White sugar 2. Brown sugar, and 3. Custard sugar. < The company uses a conventional, volume-based product costing system with plantwide manufacturing and selling overhead applied based on machine hours on all products. The company's total annual overhead cost is $405,000 made up of the following cost pools: < Activity Cost pool Production Machine set up Inspection Shipping Activity costs < $247,500 48,000 < 12,500 69,400 27,600 Total $405.000 Customer service RV The activity driver usage quantities and number of 40 kg bags produced for the three products are as follows:+ Product Machine Hours of setups Number of Number of Number of Number of Number of inspections orders service 40 kg bags requests < 1. White sugar 2,000 50 100_ 410 25 8,000 2. Brown sugar 1,250 70 160 1,100 200 5,000 3. Custard sugar 1,250 80 240 800 120 5,000 Total 4,500 200 500 2,310 345 18,000 The company historically allocated its manufacturing and selling overhead based on plantwide machine hour rates and charged the same hourly rate for all three products. The direct materials and labour cost for each 40 kg bag of sugar is $30 irrespective of the type. The company's pricing policy is to add a mark-up of 20% on full cost. The company had set a selling price of $63 per 40 kg bags of sugar based on the above pricing formula. < However, the company has noticed that the demand for its brown sugar and custard sugar is quite strong, but its white sugar is not selling at all. The management suspects that there is something wrong in the costing and pricing of the sugars. Top management of the company has hired you to conduct an Activity-based costing study for proper costing and pricing of products. You have established the following activity cost drivers for each of the five activity cost pool: < Activity Production Set up Cost driver Machine hours < Number of setups < Number of inspections < Number of customer orders < Inspection Shipping Customer service Number of service requests Question: < 1. Develop product unit costs per bag for the three types of sugar based on activity-based costing (ABC) system. 2. Refer to the product costs developed in Requirement (4). Prepare a table showing how Bundaberg's conventional, volume-based product costing system distorts the product costs of white sugar, brown sugar, and custard sugar. F