Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year:

Required:
1. Determine the total overhead assigned to each product using the four activity drivers.
2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs.
3. Using ABC as the benchmark, calculate the percentage error and comment on the accuracy of the reduced system. Explain why this approach may be desirable.LO1 

Transcribed Image Text:

Activity Expected Cost Activity Driver Activity Capacity Setting up equipment $126,000 Number of setups 150 Ordering materials 18,000 Number of orders 900 Machining 126,000 Machine hours 10,500 Receiving 30,000 Receiving hours 1,250 Silven produces two models of cell phones with the following expected activity demands: Model X Model Y Units completed 5,000 10,000 Number of setups 100 50 Number of orders 300 600 Machine hours 6,000 4,500 Receiving hours 375 875