Question

Zeus Industries manufactures two types of electrical power units, custom and standard, which involve four factory...

1. 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 \$ 81,000 Number of setups Procurement 145,000 Number of purchase orders (PO) Quality control 188,500 Number of inspections Materials management 80,000 Number of components Total \$494,500

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

 Setups Purchase     Orders Inspections Components Unit Volume Custom 450 1,050 2,100 250 2,000 Standard 150 400 800 150 2,000 Total 600 1,450 2,900 400 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.

Check My Work3 more Check My Work uses remaining.

a.

 Activity rates Production setups Procurement Quality control Materials management Activity costs \$81,000 \$145,000 \$188,500 \$80,000 Activity base 600 1,450 2,900 400 Activity rate \$135 /setup \$100 /PO \$65 /inspection \$200 /component

b.

 Custom Standard Setup totals \$60,750 (450*\$135) \$20,250 (150*\$135) Purchase orders totals 105,000 (1,050*\$100) 40,000 (400*\$100) Inspections totals 136,500 (2,100*\$65) 52,000 (800*\$65) Components totals 50,000 (250*\$200) 30,000 (150*\$200) Total product costs \$352,250 \$142,250 Unit volume 2,000 2,000 Unit cost \$176.13 \$71.13

c.

Direct labor hours = 4,000 hours

Factory overhead rate = \$494,500 / 4,000 = \$123.625

Per unit cost = 4,000*\$123.625 / 4,000 = \$123.63 (rounded of)

d.

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

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