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 $ 79,750 Number of setups Procurement 144,000 Number of purchase orders (PO) Quality control 256,000 Number of inspections Materials management 126,000 Number of components Total $605,750 The activity-base usage quantities for each product are as follows: Setups Purchase Orders Inspections Components Unit Volume Custom 300 1,200 2,400 400 2,000 Standard 250 400 800 300 2,000 Total 550 1,600 3,200 700 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 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. $fill in the blank 27per unit d. The custom product will consume materials management activities than will the standard product
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 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 | $ 79,750 | Number of setups | |
| Procurement | 144,000 | Number of purchase orders (PO) | |
| Quality control | 256,000 | Number of inspections | |
| Materials management | 126,000 | Number of components | |
| Total | $605,750 |
The activity-base usage quantities for each product are as follows:
| Setups | Purchase Orders |
Inspections | Components | Unit Volume | ||||||
| Custom | 300 | 1,200 | 2,400 | 400 | 2,000 | |||||
| Standard | 250 | 400 | 800 | 300 | 2,000 | |||||
| Total | 550 | 1,600 | 3,200 | 700 | 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 |
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.
$fill in the blank 27per unit
d. The custom product will consume materials management activities than will the standard product.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
