Brief Exercise $4-4$ Consumption Ratios

Larsen, Inc., produces two types of electronic parts and has provided the following data:

$\backslash$table$[[,$Part X$12,$Part YK$7,$Total$],[$Units produced,$100,000,600,000,-],[$Direct labor hours,$30,000,70,000,100,000],[$Machine hours,$50,000,300,000,350,000],[$Number of setups,$40,80,120],[$Testing hours,$1,000,9,000,10,000],[$Number of purchase orders,$500,3,500,4,000]]$

There are four activities: machining, setting up$,$ testing, and purchasing.

Required:

Calculate the activity consumption ratios for each product.

Calculate the consumption ratios for the plantwide rate $($direct labor hours$).$ When compared with the activity ratios, what can you say about the relative accuracy of a plantwide rate? Which product is undercosted?

What if the machine hours were used for the plantwide rate? Would this remove the cost distortion of a plantwide rate?