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:

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 0.25 machine hour per unit.
Instructions
1. Determine the activity rate for each activity.
2. Determine the total and per-unit activity costs for all three products.
3. Why aren't the activity unit costs equal across all three products, since they require the same machine time per unit?

Transcribed Image Text:

Number of Customer Orders Number of Customer Service White sugar Brown sugar Powdered sugar Machine Hours 2,000 1,250 1.250 4,500 Number of Setups 50 70 80 200 Number of Inspections 100 160 240 500 Requests Units 8,000 5,000 5,000 18,000 410 1,100 800 2,310 25 200 120 345 Total