Question
Sweet Sugar Company manufactures three products (white sugar, brown sugar, and powdered sugar) in a continuous production process. Senior management has aske the controller
Sweet Sugar Company manufactures three products (white sugar, brown sugar, and powdered sugar) in a continuous production process. Senior management has aske 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 Setup Inspection Shipping Customer service Total $415,800 275,100 116,800 129,200 37,200 $974,100 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: White sugar Brown sugar Number of Setups Machine Hours Number of Inspections Number of Customer Orders Customer Service Requests Units 3,390 180 320 760 30 8,475 2,160 270 480 2,090 190 5,400 Customer Number of Number of Setups. Machine Hours Number of Inspections. Service Customer Orders Requests Units White sugar 3,390 180 320 760 30 8,475 Brown sugar 2,160 270 480. 2,090 190 5,400 Powdered sugar 2,150 250 800 950 80 5,375 Total 7,700 700 1,600 3,800 300 19,250 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 Setup Inspection Shipping Customer service per machine hour per setup per move per cust. ord. per customer service request 2. Determine the total and per-unit activity cost for all three products. White sugar Total Activity Cost Activity Cost Per Unit Brown sugar Powdered sugar 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
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