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 Activity Production The activity bases identified for each activity are as follows: Activity Base Setup Inspection Shipping Customer Service Budgeted Activity Cost $418,900 298,900 85,800 112,000 91,700 $1,007,300 Machine hours Number of setups Number of inspections Number of customer orders Number of customer service requests White sugar Brown sugar Powdered sugar Total The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: 3,120 1,990 1,990 7,100 Number Number of Customer Machine of Number of Customer Service Hours Setups Inspections Orders 180 220 270 330 250 550 700 1,100 Each product requires 0.9 machine hour per unit. 800 2,200 1,000 4,000 Requests Units 70 440 190 700 7,800 4,975 4,975 17,750

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 Activity Production The activity bases identified for each activity are as follows: Activity Base Setup Inspection Shipping Customer Service Budgeted Activity Cost $418,900 298,900 85,800 112,000 91,700 $1,007,300 Machine hours Number of setups Number of inspections Number of customer orders Number of customer service requests White sugar Brown sugar Powdered sugar Total The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: 3,120 1,990 1,990 7,100 Number Number of Customer Machine of Number of Customer Service Hours Setups Inspections Orders 180 220 270 330 250 550 700 1,100 Each product requires 0.9 machine hour per unit. 800 2,200 1,000 4,000 Requests Units 70 440 190 700 7,800 4,975 4,975 17,750

Name: Activity-based product costingSweet Sugar Company manufactures three
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Description: Activity-based product costingSweet Sugar Company manufactures three products (white sugar, brown sugar, and powdered sugar) in a continuous productionprocess. Senior management has asked the controller to conduct an activity-based costing study. Th

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Concept explainers

Process Costing

Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure. 

Job Costing

Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.

ABC Costing

Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.

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Question

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
The activity bases identified for each activity are as follows:
Activity Base
Activity
Production
Setup
Inspection
Shipping
Customer
Service
Budgeted
Activity Cost
Machine hours
Number of setups
Number of inspections
Number of customer
orders
$418,900
298,900
85,800
112,000
91,700
$1,007,300
Number of customer
service requests
White sugar
Brown sugar
Powdered sugar
Total
The activity-base usage quantities and units produced for the three products were determined from corporate records and are as
follows:
3,120
1,990
1,990
7,100
Number
Number of
Machine of Number of Customer
Hours Setups Inspections Orders
180
270
250
700
220
330
550
1,100
Each product requires 0.9 machine hour per unit.
800
2,200
1,000
4,000
Customer
Service
Requests Units
70
440
190
700
7,800
4,975
4,975
17,750

Required:
If required, round all per unit amounts to the nearest cent.
1. Determine the activity rate for each activity.
per machine hour
per setup
per inspection hour
per cust. ord.
per customer service
Production
Setup
Inspection
Shipping
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

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