ABC, activity area cost driver rates (continuation of 11,1 1). Exercise 11.11 reports ABC data for the three activity areas (cleaning, cutting and packaging) on a per output unit basis (per kg of potato chips). This format emphasises product costing. An alternative approach that emphasises the costs of individual processes (activities) is to identify

(a) the costs at each activity area, and

(b) the rate per unit of the cost driver at each activity area. The following information pertains to

(a) and (b):

REQUIRED 1. What are the total activity costs in the

(a) cleaning,

(b) cutting and

(c) packaging activity areas?
2. What is the cost rate per unit of the cost driver in the

(a) cleaning,

(b) cutting and

(c) packaging activity areas?
3. How might McCarthy Potatoes use information about the cost driver rates calculated in requirement 2 to better manage the Longford plant? lop52

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Cleaning activity area-McCarthy used 1.2 million kg of raw potatoes to yield 1 million kg of potato chips. No distinction is made as to the end product when cleaning potatoes. The cost driver is kilograms of raw potatoes cleaned. Cutting activity area-McCarthy processes raw potatoes for the retail market independently of those processed for the institutional market. The production line produces (a) 250 kg of retail potato chips per cutting-hour, and (b) 400 kg of institutional potato chips per cutting- hour. The cost driver is cutting-hours on the production line. Packaging activity area-McCarthy packages potato chips for the retail market independently of those packaged for the institutional market. The packaging line packages (a) 25 kg of retail potato chips per packaging-hour, and (b) 100 kg of institutional potato chips per packaging-hour. The cost driver is packaging-hours on the production line.