Reference no: EM132611413
Safety Glasses Inc. (SGI) is a manufacturer of protective eye equipment primarily used in home and commercial applications. Their products can also be used by hunters, woodworking enthusiasts, and in various other applications. The company's two main product lines as as follows: The highest-quality product is called Safe-T, and a low-cost, value version is called Safe-V. See below for information on the conversion costs related to the production of the products:
Factory Costs
Salaries $846,000
Supplies 146,000
Factory expense 546,000
$1,538,000
SGI 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. SGI has four activities: job setup, assembly, inspecting and finishing, and packaging.
Setup Assembly Inspecting and Finishing Packaging Total
Salaries 20% 60% 15% 5% 100%
Supplies 25 60 15 100
Factory expense 90 10 100
The activity cost drivers for the two products are summarized below.
Safe-V Safe-T
Batches 210 560
Units 56,000 68,000
Finishing hours, per unit 0.30 0.20
Packaging hours, per unit 0.20 0.10
Materials per unit$4.00 $5
Required:
Question 1. Determine the amount of the cost pool for each of the four activities.
Question 2. Determine the activity-driver rates for assigning factory costs to the two products.
Question 3. Determine the activity-based unit cost for each of the products.