Hawaiian 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 Cost Pool

Production ..........$468,000

Setup ...........168,000

Inspection ...........85,000

Shipping ...........144,000

Customer service .........50,000

Total ...........$ 915,000

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 0.4 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 Customer Service Requests Number of Machine Number of Number of Customer Hours Setups 100 150 150 400 Inspections 200 300 500 1,000 Orders White sugar Brown sugar Powdered sugar 3,200 2,000 2,000 7,200 Units 8,000 5,000 5,000 18,000 800 2,200 1,000 4,000 40 250 110 400 Total