Refer to Case 8.46. Assume that U.B Bright decided to implement an activity-based costing system that included all costs except direct material. She identities the following costs, by cost category, for the past year and selects the following resource drivers:

Next, Bright divides the company into the following activity centres:
Product Development ................................................ Baking
Sales and Dispatch ............................ Packing and Warehousing
Mixing Pastries and Batters .............................. Administration
Filling Pies and Danishes ........................ Corporate Management
The resource driver usage by each activity centre, for the various categories, follow.

Required:
1. Assign the costs to the activity centres using the resource driver consumption patterns shown above.
2. Why did U.B. Bright use cost categories in her analysis?
3. Explain how she would have identified the cost categories, and give two examples of the costs likely to be included in each category.
4. U.B. Bright used the number of employees as the resource driver for wages. Can you suggest a more accurate basis for assigning wage costs to activity centres?
5. Can you suggest a more accurate basis than machine hours for assigning depreciation costs to activity centres?

Transcribed Image Text:

Cravings for Cakes Costs and resource drivers Cost $300 000 80 000 100 000 Resource driver Cost category Number of employees Floor space Machine hours Orders placed by centre Kilowatt hours used Number of employees Wages Building costs Depreciation Consumables 50 000 400 000 20 000 $950 000 Energy Other Total Cravings for Cakes Resource drivers consumed by activity centres Cost categories (resource drivers) Energy Wages (employees) Building Depreciation Consumables (kilowatt (m²) Other Activity centres (machine hours) (orders) hours) (employees) Product development 5 200 10 Sales and dispatch Mixing 10 500 15 10 15 500 1 000 50 10 000 15 Filling 1000 3 000 100 10 000 20 Baking Packing 15 500 5 000 100 200 000 15 20 1 000 500 150 30 000 20 Administration 10 1 000 500 50 10 Corporate management Total quantity of resource drivers across all activity centres 300 25 100 5 000 10 000 500 250 000 100