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:

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 aren€™t the activity unit costs equal across all three products since they require the same machine time perunit?

Transcribed Image Text:

Number of Orders 1,150 2,000 5750 Machine Number of Numberof Customer etups Inspections Service Requests Units 10,000 5,000 5,000 20,000 White sugar Brown sugar 5,000 2,500 Powdered sugar 2,500 10,000 170 195 450 330 550 1,100 350 190 Total