421 Reducing Number of Rates Using Consumption Ratios; Activity Based Costing LO4, LOS Mendoza company nas recently decided to convert from conventional product cost- ing to an activity-based system. The company produces two types of clocks: small and large. The clocks are produced in batches. Information concerning these two products follows: Small Clock Large Clock Quantity produced 100,000 200,000 Direct labor hours 100,000 100,000 Material handling (number of moves) 2,000 4,000 Engineering (hours) 10,000 5,000 Receiving (number of orders processed) 250 500 Setups 60 20 Maintenance (hours used) 4,000 2,000 Machining machine hours) 50,000 50,000 Inspection (number of hours) 3,000 1,000 Additionally, the following overhead costs are reported for the activities associated with the two products Chapter 4 / Activity-Based Product Costing 155 Material handling $120,000 Maintenance equipment 80,000 Machining 90,000 Engineering 100,000 Receiving 30,000 Setups 96,000 Inspection 60,000 *Materials are ordered and received each time a batch is produced Required 1. Classify activities as unit-level, batch-level, product-level, and facility-level. 2. Reduce the rates by grouping all activities with identical consumption ratios into homogeneous cost pools . Select an activity driver for each cost pool, and com- pute a pool rate. 3. Using the pool rates calculated in Requirement 2, assign all overhead costs to the two products, and compute the overhead cost per unit for each