FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Sweet Sugar Company manufactures three products (white sugar, brown sugar, and powdered sugar) 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. Budgeted activity cost
Production. $489,900
Setup. 117,600
Inspection. 105,600
Shipping. 144,300
Customer service. 65,500
Total. $ 922,900
The activity bases identified for each activity are as follows:
Activity. Activity base.
Production. Machine hours
Setup. Number of set ups
Inspection. Number of Inspections
Shipping. Number of customer orders.
Customer service. Number of customer service requests.
The activity bases usage Quantities and units produced for the three products were determined from corporate records and are as follows:
(Image 1)
Step 2 in (image 2)
Transcribed Image Text:eBook
Print Item
Customer
Number of
Number of
Number of
Service
Setups
Customer Orders
Machine Hours
Inspections
Requests Units
White sugar
3,120
80
240
740
50 7,800
Brown sugaГ
1,990
110
360
2,040
320 4,975
Powdered sugar
1,990
110
600
920
130 4,975
Total
7,100
300
1,200
3,700
500 17,750
Each product requires 0.9 machine hour per unit.
Required:
If required, round all per unit amounts to the nearest cent.
1. Determine the activity rate for each activity.
Production
per machine hour
Setup
Inspection
per move
Shipping
per cust, ord.
Customer service
per customer service request
2. Determine the total and per-unit activity cost for all three products.
Total Activity Cost
Activity Cost Per Unit
White sugar
%24
%24
%24
Transcribed Image Text:akeAssignmentSessionLocator3&
eBook
Print Item
Total
7,100
300
1,200
3,700
500 17,750
Each product requires 0.9 machine hour per unit.
Required:
If required, round all per unit amounts to the nearest cent.
1. Determine the activity rate for each activity.
Production
$4
per machine hour
Setup
$4
per setup
Inspection
$4
per move
Shipping
per cust. ord.
Customer service
per customer service request
2. Determine the total and per-unit activity cost for all three products.
Total Activity Cost
Activity Cost Per Unit
White sugar
Brown sugar
Powdered sugar
3. Why aren't the activity unit costs equal across all three products since they require the same machine time per unit?
The unit costs are different because the products consume many activities in ratios different from the volume
%24
%24
%24
%24
%24
%24
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