process activity analysis 424874

The Mr. Frizz Beverage Company bottles soft drinks into aluminum cans. The manufacturing process consists of three activites:

1. Mixing: water, sugar, and beverage concentrate are mixed.

2. Filling: mixed beverage is filled into 12oz. cans.

3. Packaging: filled cans are boxed into “fridge packs.”

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

Mixing Activity Cost $336,000

Filling Activity Cost $304,000

Packaging Activity Cost $160,000

Each cna is expected to contain 12ozs. of beverage. Thus, after being filled, each man 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.

The process begins by mixing and fillling 10,400,000 cans during the period, of which only 10,000,000 cans are actually packaged. Four hundred thousand cans are rejected due to underweight kicks.

A process improvement team has determined that cooling the cans piror to filling them will reduce the amount of overflows due to expansin. After this improvement, the number of kicks is expected to decline from 400,000 cans to 100,000 cans.

a. Determine the activity cost per can under present operations.

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

c. Determine the expected activity cost per can agter improvements. Round to the nearest tenth of a cent.