The Brite Beverage Company bottles soft drinks into aluminum cans. The manufacturing process consists of three activities: i. Mixing: water, sugar, and beverage concentrate are mixed. ii. Filling: mixed beverage is filled into 12-oz. cans. iii. Packaging: properly filled cans are boxed into cardboard “fridge packs.” The activity costs associated with these activities for the period are as follows: Activity Costs Mixing $218,000 Filling 186,000 Packaging 99,000 Total 503,000 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 6,300,000 cans during the period, of which only 6,000,000 cans are actually packaged. Three hundred thousand 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 300,000 cans to 63,000 cans, thus increasing the number of filled cans to 6,237,000 [6,000,000 + (300,000 − 63,000)]. a. Determine the total activity cost per packaged can under present operations. 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.)
The Brite Beverage Company bottles soft drinks into aluminum cans. The manufacturing process
consists of three activities:
i. Mixing: water, sugar, and beverage concentrate are mixed.
ii. Filling: mixed beverage is filled into 12-oz. cans.
iii. Packaging: properly filled cans are boxed into cardboard “fridge packs.”
The activity costs associated with these activities for the period are as follows:
Activity Costs
Mixing $218,000
Filling 186,000
Packaging 99,000
Total 503,000
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 6,300,000 cans during the period, of which only 6,000,000
cans are actually packaged. Three hundred thousand 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 300,000 cans to 63,000 cans, thus increasing the number of filled cans to 6,237,000
[6,000,000 + (300,000 − 63,000)].
a. Determine the total activity cost per packaged can under present operations.
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.)
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