Activity-Based Costing -
Pure Cane 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
|
Activity Costs
|
|
Production
|
$247,500
|
|
Setup
|
48,000
|
|
Inspection
|
12,500
|
|
Shipping
|
69,300
|
|
Customer service
|
27,600
|
|
Total
|
$404,900
|
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
|
Number of Customer Service Requests
|
Units
|
|
White sugar
|
2,000
|
50
|
100
|
410
|
25
|
8,000
|
|
Brown sugar
|
1,250
|
70
|
160
|
1,100
|
200
|
5,000
|
|
Powdered sugar
|
1,250
|
80
|
240
|
800
|
120
|
5,000
|
|
Total
|
4,500
|
200
|
500
|
2,310
|
345
|
18,000
|
Each product requires 0.25 machine hour per unit.
Required:
1. Determine the activity rate for each activity.
2. Determine the total and per-unit activity costs for all three products. Round "Activity cost per unit" answers to two decimal places.