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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

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 $452,600
Setup 197,500
Inspection 105,300
Shipping 129,600
Customer service 78,000
Total $963,000

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 3,210 130 260 720 60 8,025
Brown sugar 2,040 190 390 1,980 380 5,100
Powdered sugar 2,050 180 650 900 160 5,125
Total 7,300 500 1,300 3,600 600 18,250

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 $ per machine hour
Setup $ per setup
Inspection $ per move
Shipping $ per cust. ord.
Customer service $ 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 $ $
Brown sugar
Powdered sugar

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 .

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 $452,600
Setup 197,500
Inspection 105,300
Shipping 129,600
Customer service 78,000
Total $963,000

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 3,210 130 260 720 60 8,025
Brown sugar 2,040 190 390 1,980 380 5,100
Powdered sugar 2,050 180 650 900 160 5,125
Total 7,300 500 1,300 3,600 600 18,250

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 $ per machine hour
Setup $ per setup
Inspection $ per move
Shipping $ per cust. ord.
Customer service $ 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 $ $
Brown sugar
Powdered sugar

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 .

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