Comment on Jacob Carder's observations concerning the outcomes. Jacob's comments seem to be on target. explains less than 40 percent of the variability in overhead cost-not enough to justify using as the only driver to trace overhead to individual products. The a non-unit driver, explains 90 percent of the materials-handling cost variability Using the to assign materials-handling cost appears reasonable and certainly better than using direct labor cost to assign this cost. In fact, since small batches use the same as large batches but much less labor, then large batches are receiving too much materials-handling cost. Thus, some evidence exists that high-volume products are 8. How would you describe the cost behavior of the inspection activity? Assume that the quality control manager implements a program that reduces the number of defective units by 50 percent. Because of the improved quality, the demand for inspection hours will also drop by 50 percent. What is the potential monthly reduction in inspection costs? How did knowledge of inspection's cost behavior help? Inspection activity follows a step-cost function, with each step being defined by hours per year. Each step costs $ Current total activity capacity is hours. Current demand for the activity is hours. If the demand drops by 50 percent, then the new demand would be hours. Unused capacity at this point will be hours. Thus, s can be saved per month 9. Calulate the overhead cost per unit for each phone model using direct labor cost to assign all overhead costs to products. Overhead Cost per Unit Regular Deluxe 10. Calculate the overhead cost per unit using the four activities and drivers identified by Kim and Jacob. If you were Kim, would you be inclined to implement an ABC system based on the evidence from this pilot test? If required, round the answers to two decimal place. Comment on Jacob Carder's observations concerning the outcomes. Jacob's comments seem to be on target. explains less than 40 percent of the variability in overhead cost-not enough to justify using as the only driver to trace overhead to individual products. The a non-unit driver, explains 90 percent of the materials-handling cost variability Using the to assign materials-handling cost appears reasonable and certainly better than using direct labor cost to assign this cost. In fact, since small batches use the same as large batches but much less labor, then large batches are receiving too much materials-handling cost. Thus, some evidence exists that high-volume products are 8. How would you describe the cost behavior of the inspection activity? Assume that the quality control manager implements a program that reduces the number of defective units by 50 percent. Because of the improved quality, the demand for inspection hours will also drop by 50 percent. What is the potential monthly reduction in inspection costs? How did knowledge of inspection's cost behavior help? Inspection activity follows a step-cost function, with each step being defined by hours per year. Each step costs $ Current total activity capacity is hours. Current demand for the activity is hours. If the demand drops by 50 percent, then the new demand would be hours. Unused capacity at this point will be hours. Thus, s can be saved per month 9. Calulate the overhead cost per unit for each phone model using direct labor cost to assign all overhead costs to products. Overhead Cost per Unit Regular Deluxe 10. Calculate the overhead cost per unit using the four activities and drivers identified by Kim and Jacob. If you were Kim, would you be inclined to implement an ABC system based on the evidence from this pilot test? If required, round the answers to two decimal place
