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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
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 | 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:
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 | Number of setups | ||
Inspecting products | Testing hours | ||
Purchasing | 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 |
Which product is undercosted? Part YK7
3. Would this remove the cost distortion of a plantwide rate? Yes
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