Concept explainers
Activity-Based Costing
Zeus Industries manufactures two types of electrical power units, custom and standard, which involve four factory
Activity | Activity Cost | Activity Base | |
Production setup | $ 63,000 | Number of setups | |
Procurement | 118,750 | Number of purchase orders (PO) | |
Quality control | 187,500 | Number of inspections | |
Materials management | 172,000 | Number of components | |
Total | $541,250 |
The activity-base usage quantities for each product are as follows:
Setups | Purchase Orders |
Inspections | Components | Unit Volume | ||||||
Custom | 350 | 950 | 1,900 | 450 | 1,000 | |||||
Standard | 100 | 300 | 600 | 350 | 1,000 | |||||
Total | 450 | 1,250 | 2,500 | 800 | 2,000 |
a. Determine an activity rate for each activity.
Activity Rates | Production Setup | Procurement | Quality Control | Materials Management | ||||
Activity cost | $fill in the blank 1 | $fill in the blank 2 | $fill in the blank 3 | $fill in the blank 4 | ||||
÷ Activity base | fill in the blank 5 | fill in the blank 6 | fill in the blank 7 | fill in the blank 8 | ||||
Activity rate | $fill in the blank 9 | /setup | $fill in the blank 10 | /PO | $fill in the blank 11 | /inspection | $fill in the blank 12 | /component |
b. Assign activity costs to each product and determine the unit activity cost, using the activity rates from part (a). Round unit costs to the nearest cent.
Custom | Standard | |||
Setups Total | $fill in the blank 13 | $fill in the blank 14 | ||
Purchase Orders Total | fill in the blank 15 | fill in the blank 16 | ||
Inspections Total | fill in the blank 17 | fill in the blank 18 | ||
Components Total | fill in the blank 19 | fill in the blank 20 | ||
Total product cost | $fill in the blank 21 | $fill in the blank 22 | ||
Unit volume | fill in the blank 23 | fill in the blank 24 | ||
Unit cost | $fill in the blank 25 | $fill in the blank 26 |
c. Assume that each product required one direct labor hour per unit. Determine the per-unit cost if factory overhead is allocated on the basis of direct labor hours. Round your answer to the nearest cent.
$fill in the blank 27per unit
d. The custom product will consume materials management activities than will the standard product.
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