Process Activity Analysis The Quench Beverage Company bottles soft drinks into a

Question

Process Activity Analysis The Quench Beverage Company bottles soft drinks into aluminum cans. The manufacturing process consists of three activities 1. Mixing: water, sugar, and beverage concentrate are mixed 2. Filling: mixed beverage is filled into 12-oz. cans. 3. Packaging: properly filled cans are boxed into cardboard "fridge packs." The activity costs associated with these activities for the period are as follows: $653,000 579,000 198,000 1,430,000 Mixing Filling Packaging Total The activity costs do not include materials costs, which are ignored for this analysis. 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 11,440,000 cans during the period, of which only 11,000,000 cans are actually packaged. The difference of 440,000 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 440,000 cans to 110,000 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 activity costs from the expected improvements. $5,940 c. Determine the expected total activity cost per packaged can after improvements. Round to three decimal places 12.67 per can

Explanation / Answer

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

Total activity costs under present operations = $1,430,000

Total cans packaged under present operations = 11,000,000

Total activity cost per packaged can under present operations = $1,430,000/11,440,000 = $ 0.13per can

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

Current packaging activity costs for 11,000,000 bottles packaged = $ 198,000

So, packaging cost per bottle = $ 198,000/11,000,000 = $ 0.018 per bottle packaged

So, for 11,330,000 filled cans, the total packaging activity cost = 611,330,00*$ 0.018 = $ 203,940

So, amount of increased packaging activity costs from the expected improvements

= $ 203,940- $ 198,000 = $5,940

c) As we can find, the process improvement will only result into increasing the number of packaged cans as the number of rejected cans after filling them will reduce. So, the mixing and filling costs will remain the same and the packaging cost will change as calculated above.

So, total activity costs

= $653,000 + $ 579,000 + $ 203,940 = 1,435,940

So, the expected total activity cost per packaged can after improvements

= $1,435,940/11,330,000 = $0.127

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