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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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