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

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.

Instructions

1. Determine the activity rate for each activity.

2. Determine the total and per-unit activity cost for all three products. Round to the nearest cent.

3. Why arent the activity unit costs equal across all three products since they require the same machine time per unit?