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 $$351,000$

Setup $154,800$

Inspection $116,800$

Shipping $120,000$

Customer Service $75,600$

Total $$818,200$

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:

Line Item Description Machine Hours Number of Setups Number of Inspections Number of Customer Orders Customer Service Requests Units

White sugar $2,860100320800607,150$

Brown sugar $1,8201504802,2003804,550$

Powdered sugar $1,8201508001,0001604,550$

Total $6,5004001,6004,00060016,250$

Each product requires $0\mathrm{.}9$ machine hour per unit.

Required:

If required, round all per unit amounts to the nearest cent.

$1.$ Determine the activity rate for each activity.

Activity Amount

Production $fill in the blank $1$ per machine hour

Setup $fill in the blank $2$ per setup

Inspection $fill in the blank $3$ per inspection hour

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.

Line Item Description 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 fill in the blank $1$ of $1$

$.$