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Activity-Based Costing Each product requires 0.25 machine hour per unit. Require

ID: 2473427 • Letter: A

Question

Activity-Based Costing

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.

Check My Work (2 remaining)

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:

The activity bases identified for each activity are as follows:

The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

Each product requires 0.25 machine hour per unit.

Required:

1. Determine the activity rate for each activity.

Activity Rate Production $ /mh Setup $ /setup Inspection $ /insp. Shipping $ /cust. ord. Customer Service $ /req.

2. Determine the total and per-unit activity costs for all three products. Round "Activity cost per unit" answers to two decimal places.

White Sugar Brown Sugar Powdered Sugar Total activity cost $ $ $ Activity cost per unit $ $ $

Explanation / Answer

1)Activity Rate = Total activity cost/ total activity level

   Production = 247500/4500

                                = 55 $ /mh

    Setup = 48000/200

                = 240$ /setup

Inspection = 12500/500

                     = 25$ /insp.

Shipping = 69300/2310

                   = 30 $ /cust. ord.

Customer service = 27600/345

                                                =80 $ /req.

2)

White sugar

Brwon sugar

Powdered sugar

production

110000

68750

68750

Setup

12000

16800

19200

inspection

2500

4000

6000

shipping

12300

33000

24000

customer service

2000

16000

9600

Total cost

138800

138550

127550

Cost per unit = total cost/ no. of units

White sugar = 138800/8000

                                =17.35

Brown sugar = 138550/5000

                                =27.71

Powdered Sugar = 127550/5000

                                = 25.51

White sugar

Brwon sugar

Powdered sugar

production

110000

68750

68750

Setup

12000

16800

19200

inspection

2500

4000

6000

shipping

12300

33000

24000

customer service

2000

16000

9600

Total cost

138800

138550

127550

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