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 $ 42,000 Number of setups Procurement 137,500 Number of purchase orders (PO) Quality control 200,000 Number of inspections Materials management 168,000 Number of components Total $547,500 The activity-base usage quantities for each product are as follows: Setups Purchase Orders Inspections Components Unit Volume Custom 200 1,100 2,200 450 2,000 Standard 150 150 300 350 2,000 Total 350 1,250 2,500 800 4,000 a. Determine an activity rate for each activity. Activity Rates Production Setup Procurement Quality Control Materials Management Activity cost $ $ $ $ ÷ Activity base Activity rate $ /setup $ /PO $ /inspection $ /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 $ $ Purchase Orders Total Inspections Total Components Total Total product cost $ $ Unit volume Unit cost $ $ 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.$per unit d. The custom product will consume materials management activities than will the standard product.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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	$ 42,000		Number of setups
Procurement	137,500		Number of purchase orders (PO)
Quality control	200,000		Number of inspections
Materials management	168,000		Number of components
Total	$547,500

The activity-base usage quantities for each product are as follows:

	Setups	Purchase Orders	Inspections	Components	Unit Volume
Custom	200		1,100		2,200	450	2,000
Standard	150		150		300	350	2,000
Total	350		1,250		2,500	800	4,000

a. Determine an activity rate for each activity.

Activity Rates	Production Setup	Procurement	Quality Control	Materials Management
Activity cost	$		$		$		$
÷ Activity base
Activity rate	$	/setup	$	/PO	$	/inspection	$	/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	$		$
Purchase Orders Total
Inspections Total
Components Total
Total product cost	$		$
Unit volume
Unit cost	$		$

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.
$per unit

d. The custom product will consume materials management activities than will the standard product.

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