Reference no: EM132849831
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 $846,000
Supplies 146,000
Factory expense 546,000
$1,538,000
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 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.
Activities Activity Driver Setup Batch Assembly Units Inspect and finishing Finishing hours Packaging Packing hours
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 -
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.