12. Erickson Fabricators completed two jobs in June. Erickson Fabricators recorded the following costs assigned to the jobs by the company's activity based costing system: 1 (Click the icon to view the costs.) Job 622 required 3,000 parts, 80,000 lathe turns, and 1,000 machine hours. All 400 of the job's output units were tested. All units of Job 409 were tested. Requirements 1. How do you know that at least one of the costs recorded for the two jobs is inaccurate? 2. 3. Disregard materials handling costs. How many parts were used for Job 409? How many lathe turns did Job 409 require? How many machine hours? How many units were produced in Job 409? A nearby company has offered to test all product units for $9 each. Based on ABC data, should Erickson Fabricators accept or reject the offer? Give your reason. Requirement 1. How do you know that at least one of the costs recorded for the two jobs is inaccurate? Either the (1) cost is inaccurate. Both costs were assigned based on the number of (2) Thus, the ratio of Job 409 (3) cost to Job 622 (4) cost should be the same as the ratio of Job 409 (5) cost to Job 622 (6) cost. times as many parts simultaneously. The materials handling cost ratio is (7). but the grinding cost ratio is (8) Job 622 cannot have (9) times as many parts as Job 409 and (10) Requirement 2. Disregard materials handling costs. How many parts were used for Job 409? How many lathe turns did Job 409 require? How many machine hours? How many units were produced in Job 409? Begin by determining the allocation rate for each of the four activities. Select the labels in the formula, and then compute the rate for each activity. (Round the allocation rates to the nearest cent.) Lathe work (11) (12) Activity cost = allocation rate / turn Print Milling Grinding Testing mach. hour part / unit The second step is to use the cost allocation rate for each activity to determine the quantity of the allocation base Job 409 used. Select the labels in the formula, and then compute the quantity of the allocation base for each activity. (Round rates to the nearest cent. Round the quantities of the allocation base to the nearest whole number.) Quantity of the (13) (14) = allocation base Lathe work turns Milling Grinding hours parts Testing units Based on the ABC information, Erickson should (15). Requirement 3. A nearby company has offered to test all product units for $9 each. Based on ABC data, should Erickson Fabricators accept or reject the offer? Give your reason. the company's offer to test units for $9 each. Erickson's cost of performing this activity is $ per unit. 1: Costs Allocated Cost Activity Materials handling Allocation Base Job 409 Job 622 Number of parts $ 550 $ 1,650 Lathe work Number of lathe turns 5,100 16,000 Milling Grinding Number of machine hours Number of parts 3,700 25,000 300 1,500 Testing Number of output units 145 2,900