Would job order costing or process costing be used by the Smarties Candy Company?

Photo of Smarties candies

Source: Wendy Tietz

Smarties come in six flavors: white (orange crème), yellow (pineapple), pink (cherry), green (strawberry), purple (grape), and orange (orange). Smarties are gluten free and vegan and have 25 calories per roll of 15 candies. The main ingredient in Smarties is dextrose, a form of sugar.

The Smarties Candy Company, founded in 1949, makes its Smarties candy in a New Jersey plant.  Its founder bought gunpowder pellet machines after World War I and repurposed them to make the tablet-shaped candies. Smarties are made by color in large batches and then dumped together to be sorted by machines into rolls and packs.

Three granddaughters of the original founder of Smarties now run the company and have been working to improve efficiency. Their chief mechanic designed a faster candy press and a new wrapper machine.  Previously, 125 Smarties rolls could be wrapped per minute; now 200 rolls can be wrapped per minute.

Smarties are produced 24 hours a day. (You can see a short video clip about Smarties and the production process at http://www.fyi.tv/shows/food-factory-usa/videos/these-women-have-business-smarties .)

The Smarties Candy Company has its one main product that is likely to account for most of its sales, but recently it has introduced Smarties ‘n creme, which are tablets that are about the size of a quarter and have a flavor burst that is half fruit (strawberry, blueberry, raspberry, peach, or orange) and half cream (dairy-free.)

Questions

  1. Give an example of each of the following types of costs at the Smarties Candy Company:
    • Direct material
    • Direct labor
    • Manufacturing overhead
    • Selling and administrative expense
  2. Assume that only Smarties candies are made in the New Jersey plant. Do you think the Smarties Candy Company is likely to use job order costing or process costing? Explain.
  3. If the New Jersey plant begins to produce Smarties ‘n creme in addition to Smarties candy rolls, would this change be likely to whether the company uses job order costing or process costing? Why or why not?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

  • Student handout (pdf) (word) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

One Response to “Would job order costing or process costing be used by the Smarties Candy Company?”

  1. I used the Smarties video and handout in my Managerial Accounting class and think it worked well. I hope to find more examples like this.

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