Sweetheart Brands packages single-sized servings of sugar and sugar substitute for fast-food restaurants. The activities required...

Transcribed Image Text:

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. Sugar $ 0.02 0.04 Overhead is currently assigned to the two products based on machine hours. The following information is provided regarding overhead costs: Traceable Costs Sugar Substitute $ 0.04 0.08 $ 58,000 164,000 28,000 $ 250,000 Cost Driver Number of setups Number of machine hours Number of batches Sugar Line 145 16,000 230 Sugar Substitute Line 145 34,000 330 Total 290 50,000 560 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 costhg system over- or undercost the products? 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. Sugar $ 0.02 0.04 Overhead is currently assigned to the two products based on machine hours. The following information is provided regarding overhead costs: Traceable Costs Sugar Substitute $ 0.04 0.08 $ 58,000 164,000 28,000 $ 250,000 Cost Driver Number of setups Number of machine hours Number of batches Sugar Line 145 16,000 230 Sugar Substitute Line 145 34,000 330 Total 290 50,000 560 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 costhg system over- or undercost the products?

Answer rating: 100% (QA)

a Predetermined overhead rate under the current method Total Traceable Costs 58000 164000 28000 250000 500000 Total Machine Hours 16000 34000 50000 10... View the full answer