Question

EyeGuard Equipment Inc. (EEN manufactures protective eyewear for use in commercial and home applications. The product is ako used by hunters, home woodworking hobbyists, and in other applications. The firm has two main product lines the highest quality product is called Safe-T, and a low-cost, value version is called Safe V. Information on the factory conversion costs for EE is as follows: Salaries Supplies Factory expense Factory Costs $ 854,00 154,000 544.000 $ 1,562,000 E uses ABC to determine the unit costs of its products. The firm uses resource consumption cost drivers based on rough estimates or the amount that each activity consumes, as shown below. EEl has four activities: job setup, assembly, inspecting and finishing and packaging Setup Assembly Inspecting and Finishing Packaging Salaries Supplies Factory expense The activity cost drivers for the two products are summarized below Activities Setup Assembly Inspect and finishing Packaging Activity Driver Batch Units Finishing hours Packing hours Units Finishing hours, per unit Packaging hours, per unit Materials per unit Required: 1. Determine the amount of the cost pool for each of the four activities 2 Determine the activity-driver rates for assigning factory costs to the two products 3. Determine the activity-based unit cost for each of the products

Answer 1

Answer 1

	Factory cost	Setup	Assembly	Inspection & Finishing	Packaging
Salary	$     854,000	$   85,400	$ 427,000	$                      213,500	$ 128,100
Suplies	$     154,000	$   23,100	$   84,700	$                        46,200	$            -
Factory expense	$     554,000	$            -	$ 387,800	$                      166,200	$            -
Total	$ 1,562,000	$ 108,500	$ 899,500	$                      425,900	$ 128,100

Answer 2

	Activity Rate
Setup	$        116.67
Assembly	$            6.43
Inspection & Finishing	$            7.61
Packaging	$            3.72

Calculations:

	Costs	Total activity	Activity Rate
Setup	$      108,500.0	930	$        116.67
Assembly	$      899,500.0	140,000	$            6.43
Inspection & Finishing	$      425,900.0	56,000	$            7.61
Packaging	$      128,100.0	34,400	$            3.72

Answer 3

	Safe V	safe T
Per Unit Costs	$              14.11	$          18.69

Calculations:

	Costs	Total activity	Activity Rate	Actual Usage - Safe V	Actual Usage - safe T	Overheads - safeV	Overheads - safe T
Setup	$      108,500.0	930	$        116.67	290	640	$             33,833.33	$              74,666.67
Assembly	$      899,500.0	140,000	$            6.43	64,000	76,000	$           411,200.00	$           488,300.00
Inspection & Finishing	$      425,900.0	56,000	$            7.61	25,600	30,400	$           194,697.14	$           231,202.86
Packaging	$      128,100.0	34,400	$            3.72	19,200	15,200	$             71,497.67	$              56,602.33
Total	$ 1,562,000.00					$          711,228.15	$           850,771.85

	Safe V	safe T
Overheads	$          711,228	$      850,772
Direct material	$          192,000	$      532,000
Total costs	$          903,228	$   1,382,772
Units	64,000	76,000
Per Unit Costs	$              14.11	$          18.19

In case of any doubt, please comment.