Activity-Based Costing Each product requires 0.25 machine hour per unit. Require
ID: 2473427 • 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.
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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 = Total activity cost/ total activity level
Production = 247500/4500
= 55 $ /mh
Setup = 48000/200
= 240$ /setup
Inspection = 12500/500
= 25$ /insp.
Shipping = 69300/2310
= 30 $ /cust. ord.
Customer service = 27600/345
=80 $ /req.
2)
White sugar
Brwon sugar
Powdered sugar
production
110000
68750
68750
Setup
12000
16800
19200
inspection
2500
4000
6000
shipping
12300
33000
24000
customer service
2000
16000
9600
Total cost
138800
138550
127550
Cost per unit = total cost/ no. of units
White sugar = 138800/8000
=17.35
Brown sugar = 138550/5000
=27.71
Powdered Sugar = 127550/5000
= 25.51
White sugar
Brwon sugar
Powdered sugar
production
110000
68750
68750
Setup
12000
16800
19200
inspection
2500
4000
6000
shipping
12300
33000
24000
customer service
2000
16000
9600
Total cost
138800
138550
127550
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