Required: If required, round all per unit amounts to the nearest cent. A. Determine the activity rate for each activity. Production per machine hour Setup per setup Inspection per inspection Shipping per cust. ord. Customer service per customer service request B.Determine the total and per-unit activity cost for all three products. Total Activity Cost Activity Cost Per Unit White sugar $fill in the blank $fill in the blank Brown sugar fill in the blank fill in the blank Powdered sugar fill in the blank fill in the blank C.Why aren’t the activity unit costs equal across all three products since they require the same machine time per unit?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
1-Sweet 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 | Budgeted Activity Cost | |||
| Production | $500,000 | |||
| Setup | 144,000 | |||
| Inspection | 44,000 | |||
| Shipping | 115,000 | |||
| Customer Service | 84,000 | |||
| Total | $887,000 |
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:
| 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 |
Each product requires 0.5 machine hour per unit.
Required:
If required, round all per unit amounts to the nearest cent.
A. Determine the activity rate for each activity.
| Production | per machine hour |
| Setup | per setup |
| Inspection | per inspection |
| Shipping | per cust. ord. |
| Customer service | per customer service request |
B.Determine the total and per-unit activity cost for all three products.
| Total Activity Cost | Activity Cost Per Unit | |
| White sugar | $fill in the blank | $fill in the blank |
| Brown sugar | fill in the blank | fill in the blank |
| Powdered sugar | fill in the blank | fill in the blank |
C.Why aren’t the activity unit costs equal across all three products since they require the same machine time per unit?
The unit costs are different because the products consume many activities in ratios different from the ....
2-Blue Star Airline provides passenger airline service, using small jets. The airline connects four major cities: Charlotte, Pittsburgh, Detroit, and San Francisco. The company expects to fly 170,000 miles during a month. The following costs are budgeted for a month:
| Fuel | $2,120,000 |
| Ground personnel | 788,500 |
| Crew salaries | 850,000 |
| Depreciation | 430,000 |
| Total costs | $4,188,500 |
Blue Star management wishes to assign these costs to individual flights in order to gauge the profitability of its service offerings. The following activity bases were identified with the budgeted costs:
| Airline Cost | Activity Base |
| Fuel, crew, and depreciation costs | Number of miles flown |
| Ground personnel | Number of arrivals and departures at an airport |
The size of the company's ground operation in each city is determined by the size of the workforce. The following monthly data are available from corporate records for each terminal operation:
| Terminal City | Ground Personnel Cost | Number of Arrivals/Departures | |||||||
| Charlotte | $256,000 | 320 | |||||||
| Pittsburgh | 97,500 | 130 | |||||||
| Detroit | 129,000 | 150 | |||||||
| San Francisco | 306,000 | 340 | |||||||
| Total | $788,500 | 940 |
Three recent representative flights have been selected for the profitability study. Their characteristics are as follows:
| Description | Miles Flown | Number of Passengers | Ticket Price per Passenger | ||||
| Flight 101 | Charlotte to San Francisco | 2,000 | 80 | $695.00 | |||
| Flight 102 | Detroit to Charlotte | 800 | 50 | 441.50 | |||
| Flight 103 | Charlotte to Pittsburgh | 400 | 20 | 382.00 |
Required:
Question Content Area
A. Determine the fuel, crew, and depreciation cost per mile flown.
$fill in the blank per mile
B. Determine the cost per arrival or departure by terminal city.
| Charlotte | $fill in the blank |
| Pittsburgh | $fill in the blank |
| Detroit | $fill in the blank |
| San Francisco | $fill in the blank |
Question Content Area
C. Use the information in (1) and (2) to construct a profitability report for the three flights. Each flight has a single arrival and departure to its origin and destination city pairs. Enter all amounts as positive numbers, except for a negative income from operations.
| Flight 101 | Flight 102 | Flight 103 | |
| Passenger revenue | $fill in the blank | $fill in the blank | $fill in the blank |
| Fuel, crew, and depreciation costs | $fill in the blank | $fill in the blank | $fill in the blank |
| Ground personnel | fill in the blank | fill in the blank | fill in the blank |
| $fill in the blank | $fill in the blank | $fill in the blank | |
| Flight income from operations | $fill in the blank | $fill in the blank | $fill in the blank |
.
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