Zeus Industries manufactures two types of electrical power units, custom and standard, which involve four factory overhead activities—production setup, procurement, quality control, and materials management. An activity analysis of the overhead revealed the following estimated activity costs and activity bases for these activities: 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
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.
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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