Activity-Based Costing Each product requires 0.25 machine hour per unit. Require
ID: 2418324 • Letter: A
Question
Activity-Based Costing
Each product requires 0.25 machine hour per unit.
Required:
1. Determine the activity rate for each activity.
2. Determine the total and per-unit activity costs for all three products. Round "Activity cost per unit" answers to two decimal places.
Activity-Based Costing
Pure Cane 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:
The activity bases identified for each activity are as follows:
The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:
Each product requires 0.25 machine hour per unit.
Required:
1. Determine the activity rate for each activity.
Activity Rate Production $ /mh Setup $ /setup Inspection $ /insp. Shipping $ /cust. ord. Customer Service $ /req.2. Determine the total and per-unit activity costs for all three products. Round "Activity cost per unit" answers to two decimal places.
White Sugar Brown Sugar Powdered Sugar Total activity cost $ $ $ Activity cost per unit $ $ $Explanation / Answer
1. Activity rate for each activity
Activity Rate
Production $ 55 /mh
Setup $ 240 /setup
Inspection $ 25 /insp.
Shipping $ 30 /Cust rec.
Customer service $ 80/req.
Working note:
Activity rate for production = Activity cost / production hours
= 247500 / 4500
= $ 55
Activity rate for set up = setup cost / no. of setup's
= 48000 / 200
= 240
Activity rate for inspection = inspection cost / no. of inspections
= 12500 / 500
= 25
Activity rate for shipping = shipping cost / no. of customer orders
= 69300 / 2310
= 30
Activity rate for customer service = customer cost / no. of customer service requests
= 27600 / 345
= 80
2. Determine the total and per unit cost for all three products
White sugar Brown sugar Powdered sugar
Total activity cost $ 138800 $ 138550 $ 127550
Activity cost per unit $ 17.35 $ 27.71 $ 25.51
Working note :
Activity cost for white sugar = (2000 * 55) + ( 50 * 240) + ( 100 * 25) + (410 * 30) + (25 * 80)
= 138800
Activity cost for Brown sugar = (1250 * 55) + ( 70 * 240) + (160 * 25) + (1100 * 30) + (200 * 80)
= 138550
Activity cost for powered sugar = (1250 * 55) + (80 * 240) + (240 * 25) + (800 * 30) + (120 * 80)
= 127550
Activity cost per unit of white sugar = 138800 / 8000 = $ 17.35
Activity cost per unit of brown sugar = 138550 / 5000 = $ 27.71
Activity cost per unit of powered sugar = 127550 / 5000 = $ 25.51
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