The Quench Beverage Company bottles soft drinks into aluminum cans. The manufact

Question

The Quench Beverage Company bottles soft drinks into aluminum cans. The manufacturing process consists of three activities:

The activity costs associated with these activities for the period are as follows:

Each can is expected to contain 12 ozs. of beverage. Thus, after being filled, each can is automatically weighed. If a can is too light, it is rejected, or "kicked," from the filling line prior to being packaged. The primary cause of kicks is heat expansion. With heat expansion, the beverage overflows during filling, resulting in underweight cans.

This process begins by mixing and filling 12,480,000 cans during the period, of which only 12,000,000 cans are actually packaged. The difference of 480,000 cans are rejected due to underweight kicks.

A process improvement team has determined that cooling the cans prior to filling them will reduce the amount of overflows due to expansion. After this improvement, the number of kicks is expected to decline from 480,000 cans to 120,000 cans.

a. Determine the total activity cost per packaged can under present operations. Round to the nearest cent.
$ per can

b. Determine the amount of increased packaging costs from the expected improvements.
$

c. Determine the expected total activity cost per packaged can after improvements. Round to three decimal places.
$ per can

Mixing $445,000 Filling 395,000 Packaging 240,000 Total 1,080,000

Explanation / Answer

Mixing

Total Activity cost after improvement

Mixing

Current situation

Mixing

$445,000 Filling 395,000 Packaging 240,000 Total 1,080,000 Output 12,000,000 Pacakging Activity cost/output 0.02 After improvement no of output          12,360,000 Pacakging Activity cost for increased output                247,200 a. Total activity cost/packaged can under current situation $                0.090 b. Increased packaging cost after improvement $          7,200.00 c.

Total Activity cost after improvement

Mixing

$445,000 Filling 395,000 Packaging                247,200 Total $1,087,200 Output          12,360,000 Total activity cost per can after improvement $                0.088

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