FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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 overhead required by the critical activities of the organization as follows:

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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