Consumption Ratios; Activity Rates

Saludable Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows:

	Scented Cards		Regular Cards
Inspection hours	110		70
Setup hours	70		10
Machine hours	190		650
Number of moves	210		80

The following activity data has been collected:

Inspecting products	$4,940
Setting up equipment	4,810
Machining	6,390
Moving materials	1,370

Required:

1. Calculate the consumption ratios for the four drivers. Round your answers to two decimal places.

	Scented Cards	Regular Cards
Inspection hours	fill in the blank 1	fill in the blank 2
Setup hours	fill in the blank 3	fill in the blank 4
Machine hours	fill in the blank 5	fill in the blank 6
Number of moves	fill in the blank 7	fill in the blank 8

2. Which of the following statements indicate there is product diversity?

Explain the significance of product diversity for decision making if the company chooses to use machine hours to assign all overhead.

If machine hours are used as the only driver, cards would receive 23% of the overhead, and cards would receive 77% of the overhead. Yet, the cards consume well over 61% of the non-machine related overhead. Thus, the Scented cards are , and the Regular cards are . This inaccuracy can adversely affect many decisions, including pricing, keep or drop, and cost-volume-profit.

3. Calculate the activity rates that would be used to assign costs to each product. Round your answers to the nearest cent.

Rates:
Inspecting products	$fill in the blank 15 per inspection hour
Setting up equipment	$fill in the blank 16 per setup hour
Machining	$fill in the blank 17 per machine hour
Moving materials	$fill in the blank 18 per move

4. Suppose that the activity rate for inspecting products is $20 per inspection hour. How many hours of inspection are expected for the coming year? If required, round your answer to nearest whole number of hours. fill in the blank 19 inspection hours