Exercise 25-23 - Activity-Based Costing Zeus Industries manufactures two types o
ID: 2417173 • Letter: E
Question
Exercise 25-23 - Activity-Based Costing
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:
A. Determine an activity rate for each activity.
B. Assign activity costs to each product, and determine the unit activity cost, using the activity rates from part (a). Round unit cost to two decimal places.
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 two decimal places.
$______ per unit
D. The custom product will consume MORE or LESS materials management activities than will the standard product.
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 $ /componentB. Assign activity costs to each product, and determine the unit activity cost, using the activity rates from part (a). Round unit cost to two decimal places.
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 two decimal places.
$______ per unit
D. The custom product will consume MORE or LESS materials management activities than will the standard product.
Explanation / Answer
Part A)
The activity rate is calculated with the use of following table:
__________
Part B)
The unit activity is calculated with the use of following table:
__________
Part C)
The overhead rate on the basis of direct labor hours can be calculated with the use of following formula:
Overhead Rate = Estimated Overhead Cost/Estimated Labor Hours
Estimated Labor Hours = 239,000/(2,000*1 + 2,000*1) = $59.75
The product cost would be $59.75 per unit.
__________
Part D)
The custom product will consume MORE materials management activities than will the standard product.
Activity Rates Production Setup Procurement Quality Control Materials Management Activity cost $44,000 $13,500 $97,500 $84,000 Activity base 400 900 1500 700 Activity rate $110 /setup $15 /PO $65 /inspection $120 /componentRelated Questions
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