EyeGuard Equipment Incorporated (EEI) manufactures protective eyewear for use in commercial and home applications. The product is also used by hunters, home woodworking hobbyists, and in other applications. The firm has two main product lines-the highest-quality product is called Safe-T, and a low-cost, value version is called Safe- V. Information on the factory conversion costs for EEl is as follows: Factory Costs $ 850,000 150,000 550,000 $ 1,550,000 Salaries Supplies Factory expense Total EEl uses ABC to determine the unit costs of its products. The firm uses resource consumption cost drivers based on rough estimates of the amount that each activity consumes, as shown below. EEI has four activities: job setup, assembly, inspecting and finishing, and packaging. Inspecting and Finishing Packaging Setup 15% Assembly 55% Total Salaries 20% 10% 100% Supplies Factory expense 20 60 20 100 80 20 100 The activity cost drivers for the two products are summarized below. Activities Activity Driver Batch Setup Assembly Inspect and finishing Packaging Units Finishing hours Packing hours Safe-V Safe-T Batches Units 250 600 60,000 72,000 Finishing hours, per unit Packaging hours, per unit Materials ner unit 0.2 0.3 0.15 $ 6.00 0.1 $ 3,50
EyeGuard Equipment Incorporated (EEI) manufactures protective eyewear for use in commercial and home applications. The product is also used by hunters, home woodworking hobbyists, and in other applications. The firm has two main product lines-the highest-quality product is called Safe-T, and a low-cost, value version is called Safe- V. Information on the factory conversion costs for EEl is as follows: Factory Costs $ 850,000 150,000 550,000 $ 1,550,000 Salaries Supplies Factory expense Total EEl uses ABC to determine the unit costs of its products. The firm uses resource consumption cost drivers based on rough estimates of the amount that each activity consumes, as shown below. EEI has four activities: job setup, assembly, inspecting and finishing, and packaging. Inspecting and Finishing Packaging Setup 15% Assembly 55% Total Salaries 20% 10% 100% Supplies Factory expense 20 60 20 100 80 20 100 The activity cost drivers for the two products are summarized below. Activities Activity Driver Batch Setup Assembly Inspect and finishing Packaging Units Finishing hours Packing hours Safe-V Safe-T Batches Units 250 600 60,000 72,000 Finishing hours, per unit Packaging hours, per unit Materials ner unit 0.2 0.3 0.15 $ 6.00 0.1 $ 3,50
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:2. Determine the activity-driver rates for assigning factory costs to the two products.
3. Determine the activity-based unit cost for each of the products.
Transcribed Image Text:EyeGuard Equipment Incorporated (EEI) manufactures protective eyewear for use in commercial and home
applications. The product is also used by hunters, home woodworking hobbyists, and in other applications. The firm
has two main product lines-the highest-quality product is called Safe-T, and a low-cost, value version is called Safe-
V. Information on the factory conversion costs for EEl is as follows:
Factory Costs
$ 850,000
150,000
550,000
$ 1,550,000
Salaries
Supplies
Factory expense
Total
EEl uses ABC to determine the unit costs of its products. The firm uses resource consumption cost drivers based on
rough estimates of the amount that each activity consumes, as shown below. EEI has four activities: job setup,
assembly, inspecting and finishing, and packaging.
Inspecting
and
Setup
Assembly
Finishing
Packaging
Total
Salaries
15%
55%
20%
10%
100%
Supplies
Factory expense
20
60
20
100
80
20
100
The activity cost drivers for the two products are summarized below.
Activities
Activity Driver
Batch
Setup
Assembly
Inspect and finishing
Packaging
Units
Finishing hours
Packing hours
Safe-V
Safe-T
Batches
250
600
Units
60,000
72,000
Finishing hours, per unit
Packaging hours, per unit
Materials per unit
0.2
0.3
0.1
0.15
$ 3.50
$ 6.00
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