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: Activity Activity Cost Activity Base Production setup $ 44,000 Number of setups Procurement 13,500 Number of purchase orders
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:
| Activity | Activity Cost | Activity Base | |
| Production setup | $ 44,000 | Number of setups | |
| Procurement | 13,500 | Number of purchase orders (PO) | |
| Quality control | 97,500 | Number of inspections | |
| Materials management | 84,000 | Number of components | |
| Total | $239,000 |
The activity-base usage quantities for each product are as follows:
| Setups | Purchase Orders |
Inspections | Components | Unit Volume | ||||||
| Custom | 290 | 760 | 1,200 | 500 | 2,000 | |||||
| Standard | 110 | 140 | 300 | 200 | 2,000 | |||||
| Total | 400 | 900 | 1,500 | 700 | 4,000 |
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 cost to two decimal places.
| 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 two decimal places.
$fill in the blank 27per unit
d. The custom product will consume materials management activities than will the standard product.
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