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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Activity-based product  costing
Sweet Sugar Company manufactures three products (white sugar, brown sugar, and pow- dered sugar) in a continuous production process. Senior management has asked the con- troller 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:
Â
Activity                                                                                                Budgeted Activity Cost
Â
Â
|
Production |
$500,000 |
|
Setup |
144,000 |
|
Inspection |
44,000 |
|
Shipping |
115,000 |
|
Customer service |
   84,000 |
Â
|
Total                                                                                                               $887,000
The activity bases identified for each activity are as   follows:
Â
Activity                                                                                           Activity Base
Â
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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:
Â
|
 |
 Machine Hours |
 Number of Setups |
 Number of Inspections |
Number of Customer Orders |
Customer Service Requests |
  Units |
|
White sugar |
5,000 |
85 |
220 |
1,150 |
60 |
10,000 |
|
Brown sugar |
2,500 |
170 |
330 |
2,600 |
350 |
5,000 |
|
Powdered sugar |
  2,500 |
195 |
   550 |
2,000 |
190 |
  5,000 |
Total                                10,000                    450                      1,100                            5,750                              600                  20,000
Â
Each product requires 0.5 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 two decimal places.
3.   Â
.                     Why aren’t the activity unit costs equal across all three products since  they require the same machine time per unit?
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