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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 Base
Machine hours
Number of setups
Number of inspections
Number of customer orders
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
80
240
800
120
4,500
500
2,310
345
18,000
Each product requires 0.25 machine hour per unit.
Required:
1. Determine the activity rate for each activity.
2. Determine the total and per-unit activity costs for all three products. Round "Activity cost per unit" answers to two decimal places.
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