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Activity-based product costing 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 overhead required by the critical activities of the organization as follows: Activity Production Setup Inspection Shipping Customer Service Total Budgeted Activity Cost $435,000 237,000 107,800 122,100 80,400 $982,300 The activity bases identified for each activity are as follows: Activity Activity Base Production Machine hours Setup Number of setups Inspection Number of inspections Shipping Number of customer orders Customer Service Number of customer service requests 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 Inspections Number of Customer Customer Service Orders Requests Units White sugar 3,300 150 280 740 60 8,250 Brown sugar 2,100 230 420 2,040 380 5,250 Powdered sugar 2,100 220 700 920 160 5,250 Total 7,500 600 1,400 3,700 600 18,750 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 Setup Inspection Shipping per machine hour per setup per inspection hour Customer service per cust. ord. per customer service request 2. Determine the total and per-unit activity cost for all three products. White sugar Brown sugar Total Activity Cost Activity Cost Per Unit 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

Activity-based product costing 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 overhead required by the critical activities of the organization as follows: Activity Production Setup Inspection Shipping Customer Service Total Budgeted Activity Cost $435,000 237,000 107,800 122,100 80,400 $982,300 The activity bases identified for each activity are as follows: Activity Activity Base Production Machine hours Setup Number of setups Inspection Number of inspections Shipping Number of customer orders Customer Service Number of customer service requests 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 Inspections Number of Customer Customer Service Orders Requests Units White sugar 3,300 150 280 740 60 8,250 Brown sugar 2,100 230 420 2,040 380 5,250 Powdered sugar 2,100 220 700 920 160 5,250 Total 7,500 600 1,400 3,700 600 18,750 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 Setup Inspection Shipping per machine hour per setup per inspection hour Customer service per cust. ord. per customer service request 2. Determine the total and per-unit activity cost for all three products. White sugar Brown sugar Total Activity Cost Activity Cost Per Unit 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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Activity-based product costing 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 overhead required by the critical activities of the organization as follows: Activity Production Setup Inspection Shipping Customer Service Total Budgeted Activity Cost $435,000 237,000 107,800 122,100 80,400 $982,300 The activity bases identified for each activity are as follows: Activity Activity Base Production Machine hours Setup Number of setups Inspection Number of inspections Shipping Number of customer orders Customer Service Number of customer service requests The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: Machine Number of Hours Setups Number of Inspections Number of Customer Orders Customer Service Requests Units White sugar 3,300 150 280 740 60 8,250 Brown sugar 2,100 230 420 2,040 380 5,250 Powdered sugar 2,100 220 700 920 160 5,250 Total 7,500 600 1,400 3,700 600 18,750 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 Setup Inspection Shipping per machine hour per setup per inspection hour Customer service per cust. ord. per customer service request 2. Determine the total and per-unit activity cost for all three products. White sugar Brown sugar Total Activity Cost Activity Cost Per Unit 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
Transcribed Image Text:Activity-based product costing 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 overhead required by the critical activities of the organization as follows: Activity Production Setup Inspection Shipping Customer Service Total Budgeted Activity Cost $435,000 237,000 107,800 122,100 80,400 $982,300 The activity bases identified for each activity are as follows: Activity Activity Base Production Machine hours Setup Number of setups Inspection Number of inspections Shipping Number of customer orders Customer Service Number of customer service requests The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: Machine Number of Hours Setups Number of Inspections Number of Customer Orders Customer Service Requests Units White sugar 3,300 150 280 740 60 8,250 Brown sugar 2,100 230 420 2,040 380 5,250 Powdered sugar 2,100 220 700 920 160 5,250 Total 7,500 600 1,400 3,700 600 18,750 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 Setup Inspection Shipping per machine hour per setup per inspection hour Customer service per cust. ord. per customer service request 2. Determine the total and per-unit activity cost for all three products. White sugar Brown sugar Total Activity Cost Activity Cost Per Unit 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
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