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

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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.

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