Concept explainers
Activity-Based Costing
Southeastern Paper Company manufactures three products (computer paper, newsprint, and specialty paper) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory
Activity | Activity Costs | ||
Production | $220,000 | ||
Setup | 117,000 | ||
Moving | 21,000 | ||
Shipping | 105,000 | ||
Product engineering | 102,000 | ||
Total | $565,000 |
The activity bases identified for each activity are as follows:
Activity | Activity Base | |
Production | Machine hours | |
Setup | Number of setups | |
Moving | Number of moves | |
Shipping | Number of customer orders | |
Product engineering | Number of test runs |
The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:
Machine Hours |
Number of Setups |
Number of Moves |
Number of Customer Orders |
Number of Test Runs |
Units | |||||||
Computer paper | 400 | 80 | 230 | 310 | 50 | 1,000 | ||||||
Newsprint | 500 | 30 | 70 | 140 | 15 | 1,250 | ||||||
Specialty paper | 200 | 150 | 300 | 550 | 105 | 500 | ||||||
Total | 1,100 | 260 | 600 | 1,000 | 170 | 2,750 |
Each product requires 0.4 machine hour per unit.
Required:
1. Determine the activity rate for each activity.
Activity Rate | |
Production | $fill in the blank 1 /mh |
Setup | $fill in the blank 2 /setup |
Moving | $fill in the blank 3 /move |
Shipping | $fill in the blank 4 /cust. ord. |
Product Engineering | $fill in the blank 5 /test run |
2. Determine the total and per-unit activity cost for all three products. Round "Activity cost per unit" answers to two decimal places.
Computer Paper | Newsprint | Specialty Paper | |
Total activity cost | $fill in the blank 6 | $fill in the blank 7 | $fill in the blank 8 |
Activity cost per unit | $fill in the blank 9 | $fill in the blank 10 | $fill in the blank 11 |
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