Question
Flowers divides its costs into six categories: 1) ingredients (direct materials), direct labor, 3) packaging, 4) utilities, 5) depreciation and amortization and 6) other indirect
Flowers divides its costs into six categories: 1) ingredients (direct materials), direct labor, 3) packaging, 4) utilities, 5) depreciation and amortization and 6) other indirect costs.
It is able to directly trace the allocation of ingredients and direct labor costs. The numbers are somewhat rounded the numbers some to simplify the math. As a result, the numbers wont match the share of costs.
Here are the direct costs for
ingredients direct labor costs
Bread 750,000,000 440,000,000
Snack Cakes 200,000,000 110,000,000
Frozen bread 50,000,000 50,000,000
Packaging, utilities, depreciation and amortization and other indirect costs are indirect costs. The amount of spending on the indirect costs are as follows:
Packaging $169,930,000
Utilities $55,326,000
Other indirect costs $252,919,000
Depreciation $144,124,000
- Assume that in a traditional costing system that all the indirect costs are allocated based on direct materials. Calculate the dollar amount of packaging costs that is allocated under the traditional costing system to the following cost objects 1) fresh bakery goods, 2) snack cakes, and 3) frozen bakery goods.
- Flowers is concerned that its snack cakes (the Tastykake part of its business) is underperforming. It is contemplating (thinking about) selling that division. It wanted to more accurately measure costs to help make that decision.
Flowers conducted an ABC costing study. It concluded that the cost driver for other indirect costs is direct labor costs.
Flowers concluded that there are two cost drivers for packaging. Direct materials is the cost driver for 50% of packaging costs. The other half of the packaging costs relates to setups. The following is the number of setups for each of the three product categories:
Baked bread 1,150 setups
Snack cakes 300 setups
Frozen bread 550 setups
Calculate the dollar amount of packaging costs that is allocated under the ABC costing system to the three cost objects 1) fresh bakery goods, 2) snack cakes, and 3) frozen bakery goods.
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