Question

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:

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:

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:

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

Each product requires 0.25 machine hour per unit.

Required:

1. Determine the activity rate for each activity.

	Activity Rate
Production
Setup
Inspection
Shipping
Customer Service

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

Answer 1

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