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		35,000		65,000		100,000
Machine hours		56,000		294,000		350,000
Number of setups		48		72		120
Testing hours		1,000		9,000		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	fill in the blank 1	fill in the blank 2	Machine hours
Setups	fill in the blank 4	fill in the blank 5	Number of setups
Inspecting products	fill in the blank 7	fill in the blank 8	Testing hours
Purchasing	fill in the blank 10	fill in the blank 11	Purchase orders

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	fill in the blank 13	fill in the blank 14

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?