Question

EyeGuard Equipment Inc. (EEI) manufactures protective eyewear for use in commercial and home applications. The product is also 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 EEI is as follows:

	Factory Costs
Salaries	$	855,000
Supplies		155,000
Factory expense		555,000
	$	1,565,000

EEI uses ABC to determine the unit costs of its products. The firm uses resource consumption cost drivers based on rough estimates of the amount that each activity consumes, as shown below. EEI has four activities: job setup, assembly, inspecting and finishing, and packaging.

	Setup			Assembly			Inspecting and Finishing			Packaging			Total
Salaries		15	%		55	%		20	%		10	%		100	%
Supplies		20			60			20						100
Factory expense					80			20						100

The activity cost drivers for the two products are summarized below.

Activities	Activity Driver
Setup	Batch
Assembly	Units
Inspect and finishing	Finishing hours
Packaging	Packing hours

	Safe-V			Safe-T
Batches		300			650
Units		65,000			77,000
Finishing hours, per unit		0.20			0.30
Packaging hours, per unit		0.10			0.15
Materials per unit	$	3.50		$	6

Required:

Complete this question by entering your answers in the tabs below.

1. Determine the amount of the cost pool for each of the four activities.

	Factory Costs Setup Assembly Inspecting & Finishing Packaging Salaries Supplies Factory expense $0 $0 $0 $0 $0

2 Determine the activity-driver rates for assigning factory costs to the two products. (Round your answers to 2 decimal places.)

	Activity-Driver Rates Setup Assembly Inspect and Finish Packaging

3. Determine the activity-based unit cost for each of the products. (Round your intermediate calculations and final answers to 2 decimal places.)

	Safe-V Safe-T Activity-based cost per unit

Answer 1

1) Amount of the cost pool for each of the four activities :- Inspecting & Factory Costs Setup Assembly Packaging Finishing 171,000 31,000 128,250 31,000 85,500 Salaries Supplies Factory expense Total 855,000 155,000 555,000 1,565,000 470,250 93,000 444,000 1,007,250 111,000 3 13,000 159,250 85,500 2) Activity-driver rates for assigning factory costs to the two products :- Activity Factory Costs Activity rate Driver Setup 159,250 167.63 Per batch Assembly 1,007,250 142,000 7.09 Per unit Inspecting & Finishing 313,000 36,100 8.67 Per finishing hour Packaging 85,500 18,050 4.74 Per packaging hour 950 3) Activity-based unit cost for each of the products :- Particulars Safe-V Safe-T Setup 50,289 108,961 Assembly 461,065 546,185 Inspecting & Finishing 112,715 200,285 Packaging 30,789 54,711 Total overhead 654,859 910,141 No of units 65,000 77,000 Cost per unit 10.07 11.82