Consumption Ratios

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

		Part X12		Part YK7		Total
Units produced		100,000		600,000
Direct labor hours		40,000		60,000		100,000
Machine hours		52,500		297,500		350,000
Number of setups		36		84		120
Testing hours		1,200		8,800		10,000
Number of purchase orders		440		3,560		4,000

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

Required:

1. Calculate the activity consumption ratios for each product. Round your answers to two decimal places.

	Consumption Ratios
Overhead Activity	Part X12	Part YK7	Activity Driver
Machining			Machine hours
Setups
Inspecting products
Purchasing

2. Calculate the consumption ratios for the plantwide rate (direct labor hours). Round your answers to two decimal places.

	Consumption Ratios
Overhead Activity	Part X12	Part YK7
Plantwide:
Manufacturing

Which product is undercosted?

3. If the machine hours were used for the plantwide rate, would this remove the cost distortion of a plantwide rate?