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activity products they costs equal hit costs are different because the products consume many activities in ratios dit

activity products they costs equal hit costs are different because the products consume many activities in ratios dit

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 14MC: Activity-based costing is preferable in a system: when multiple products have similar product...
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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: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 The activity bases identified for each activity are as follows: Activity Activity Base Production Setup Inspection Shipping 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: Budgeted Activity Cost $421,800 157,200 121,600 111,000 85,400 $897,000 Setup Inspection Shipping Customer service Machine hours Number of setups Number of inspections Number of customer orders Number of Setups $ Machine Hours White sugar 3,260 Brown sugar 2,070 Powdered sugar 2,070 Total 7,400 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 Number of Inspections 100 150 150 400 320 480 800 1,600 per machine hour per setup per move Number of Customer Orders per cust. ord. per customer service request 2. Determine the total and per-unit activity cost for all three products. Total Activity Cost 740 2,040 920 3,700 Customer Service Requests Units 70 8,150 440 5,175 190 5,175 700 18,500 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?
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 The activity bases identified for each activity are as follows: Activity Activity Base Production Setup Inspection Shipping 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: Budgeted Activity Cost $421,800 157,200 121,600 111,000 85,400 $897,000 Setup Inspection Shipping Customer service Machine hours Number of setups Number of inspections Number of customer orders Number of Setups $ Machine Hours White sugar 3,260 Brown sugar 2,070 Powdered sugar 2,070 Total 7,400 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 Number of Inspections 100 150 150 400 320 480 800 1,600 per machine hour per setup per move Number of Customer Orders per cust. ord. per customer service request 2. Determine the total and per-unit activity cost for all three products. Total Activity Cost 740 2,040 920 3,700 Customer Service Requests Units 70 8,150 440 5,175 190 5,175 700 18,500 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?
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