Question

The Brite Beverage Company bottles soft drinks into aluminum cans. The manufacturing process consists of three activities:

1. Mixing: water, sugar, and beverage concentrate are mixed.
2. Filling: mixed beverage is filled into 12-oz. cans.
3. Packaging: properly filled cans are boxed into cardboard “fridge packs.”

The activity costs associated with these activities for the period are as follows:

Mixing	$286,000
Filling	253,500
Packaging	110,500
Total	$650,000

The activity costs do not include materials costs, which are ignored for this analysis. Each can is expected to contain 12 ounces of beverage. Thus, after being filled, each can is automatically weighed. If a can is too light, it is rejected, or “kicked,” from the filling line prior to being packaged. The primary cause of kicks is heat expansion. With heat expansion, the beverage overflows during filling, resulting in underweight cans.

This process begins by mixing and filling 6,760,000 cans during the period, of which only 6,500,000 cans are actually packaged. 260,000 cans are rejected due to underweight kicks.

A process improvement team has determined that cooling the cans prior to filling them will reduce the amount of overflows due to expansion. After this improvement, the number of kicks is expected to decline from 260,000 cans to 65,000 cans, thus increasing the number of filled cans to 6,695,000 [6,500,000 + (260,000 - 65,000)].

a. Determine the total activity cost per packaged can under present operations. Round to the nearest cent.
$ per can

b. Determine the amount of increased packaging activity costs from the expected improvements.
$

c. Determine the expected total activity cost per packaged can after improvements. Round to three decimal places.
$ per can

Answer 1

Ansaxes a) Total activity costs under present operations = $650,000 Total cans packaged under present operations - 46509,000 Total activitas cost per packaged can under present Operations : $650,000/$6500,000 1 = $0.1 percan b) current packaging activity costs for $6.500.000 bottles packaged = $110,500 package. ong cost per bottle = $110,500/$6,500,000, =$0.017 per bottle packaged for $6.695,000 filled caus. the loal packaging activila cost - $6,695.000 * $0.017 - $113,815 The amount of Increased packaging activity costs from the eapected improvemente : $ 119,815~$ 110,500 - $3,315 c) The Total activity cost :- Mixing & 286,000 ng =$253,500 packaging - $ 113,815 Total achuity cost = $653.315 The expected total activity cort packaged can after improvements = $6533157 $ 6695000 - $0.098 per packaged cau.