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 Budgeted Activity Cost Production $530,400 Setup 178,000 Inspection 130,500 Shipping 111,000 Customer service 91,000 Total $1,040,900 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: Customer Number of Number of Number of Service Setups Customer Orders Inspections Requests Units Machine Hours 3,430 100 300 740 70 8,575 White sugar 450 2,040 440 5,450 Brown sugar 2,180 150
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 Budgeted Activity Cost Production $530,400 Setup 178,000 Inspection 130,500 Shipping 111,000 Customer service 91,000 Total $1,040,900 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: Customer Number of Number of Number of Service Setups Customer Orders Inspections Requests Units Machine Hours 3,430 100 300 740 70 8,575 White sugar 450 2,040 440 5,450 Brown sugar 2,180 150
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 4PB: Activity-based product costing Sweet Sugar Company manufactures three products (white sugar, brown...
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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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Print Item
Customer
Number of
Number of
Number of
Service
Setups
Customer Orders
Machine Hours
Inspections
Requests Units
White sugar
3,430
100
300
740
70 8,575
Brown sugar
2,180
150
450
2,040
440 5,450
Powdered sugar
2,190
150
750
920
190 5,475
Total
7,800
4do
1,500
3,700
700 19,500
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
$
per setup
Inspection
per move
Shipping
$4
per cust. ord.
Customer service
$4
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
Transcribed Image Text:еВook
Print Item
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
Budgeted Activity Cost
Production
$530,400
Setup
178,000
Inspection
130,500
Shipping
111,000
Customer service
91,000
Total
$1,040,900
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:
Customer
Number of
Number of
Number of
Service
Setups
Customer Orders
Inspections
Requests Units
Machine Hours
100
300
740
70 8,575
White sugar
3,430
450
2,040
440 5,450
Brown sugar
2,180
150
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