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 $415,800 Setup 268,800 Inspection 131,200 Shipping 111,600 Customer service 93,800 Total $1,021,200 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: Machine Hours Number of Setups Number of Inspections Number of Customer Orders Customer Service Requests Units White sugar 2,900 180 320 720 70 7,250 Brown sugar 1,850 270 480 1,980 440 4,625 Powdered sugar 1,850 250 800 900 190 4,625 Total 6,600 700 1,600 3,600 700 16,500 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 $fill in the blank 1 per machine hour Setup $fill in the blank 2 per setup Inspection $fill in the blank 3 per move Shipping $fill in the blank 4 per cust. ord. Customer service $fill in the blank 5 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 $fill in the blank 6 $fill in the blank 7 Brown sugar fill in the blank 8 fill in the blank 9 Powdered sugar fill in the blank 10 fill in the blank 11 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

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 $415,800 Setup 268,800 Inspection 131,200 Shipping 111,600 Customer service 93,800 Total $1,021,200 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: Machine Hours Number of Setups Number of Inspections Number of Customer Orders Customer Service Requests Units White sugar 2,900 180 320 720 70 7,250 Brown sugar 1,850 270 480 1,980 440 4,625 Powdered sugar 1,850 250 800 900 190 4,625 Total 6,600 700 1,600 3,600 700 16,500 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 $fill in the blank 1 per machine hour Setup $fill in the blank 2 per setup Inspection $fill in the blank 3 per move Shipping $fill in the blank 4 per cust. ord. Customer service $fill in the blank 5 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 $fill in the blank 6 $fill in the blank 7 Brown sugar fill in the blank 8 fill in the blank 9 Powdered sugar fill in the blank 10 fill in the blank 11 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

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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Activity-Based Product Costing

Activity	Budgeted Activity Cost
Production		$415,800
Setup		268,800
Inspection		131,200
Shipping		111,600
Customer service		93,800
	Total		$1,021,200

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:

			Machine Hours		Number of Setups		Number of Inspections		Number of Customer Orders		Customer Service Requests		Units
White sugar		2,900		180		320		720		70		7,250
Brown sugar		1,850		270		480		1,980		440		4,625
Powdered sugar		1,850		250		800		900		190		4,625
	Total		6,600		700		1,600		3,600		700		16,500

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	$fill in the blank 1 per machine hour
Setup	$fill in the blank 2 per setup
Inspection	$fill in the blank 3 per move
Shipping	$fill in the blank 4 per cust. ord.
Customer service	$fill in the blank 5 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	$fill in the blank 6	$fill in the blank 7
Brown sugar	fill in the blank 8	fill in the blank 9
Powdered sugar	fill in the blank 10	fill in the blank 11

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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