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			$500,000
Setup			144,000
Inspection			44,000
Shipping			115,000
Customer Service			84,000
	Total		$887,000

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		5,000			85			220			1,150			60			10,000
Brown sugar		2,500			170			330			2,600			350			5,000
Powdered sugar		2,500			195			550			2,000			190			5,000
	Total	10,000			450			1,100			5,750			600			20,000

Each product requires 0.5 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 inspection
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 arent 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 volume .

city Based Product Oosting Sweet Sugar Company manufactures the products while sugar, brown sugar and condere cuprin a continuous productores Senior management has seked the controller to conduct on activity boxed costin tudy. The concler identitied the amount o actory were required by the otca vides of the organizacion as rolos: | Bululu ivity Stat. Activity Produch 144.34 115.000 40.000 SR7,00 Total The activity loca der hed her arhartture smile: : Atrail Activity Bus Produit Nahren N.martine Trepertuan N.microfinepertens : 1-1 N.me on meer Damer I NEVER The sot vybase usage ousties and unles produced to the three products were ceterminato corpore records and shows: Mobilne Hours Number of Setups Number of Inspections Number of Custurica Orders Culum Savile Request Unit 5.000 SS 220 1.5. 10,000 500. Brumi 2.500 120 2.60 350 100 I. 2.500 550 2.00. 5000 predam Hyuiral: If wel. Ik lulus lui TRIC.. 1. Deccmine the activity red for each activity. Produit SU Uliwi 320 Coup 10 cerne 20 PARAFAN . Customer service 140 Ar at 2. Det Unelul de utilivily wa. Tal me out Total Activity Cust Activity Costa Unit WHITARIA $ 32,400 x $ :39:55 X Prawne 394,120 X 14.01 X Wawili 338.100 X 63.51 X 1. When the RATINI meal the Angline the eme marine per int? The unitate den her the monime many that in tine dieront trom the new