Risk Table

Risk	Risk Description	Likelihood of Risk Impact*	Risk Impact**
A	Poor media coverage creates negative public perception of JAT.	0.30	$25,000,000
B	Regulators ground aircraft as a result of poor JAT product performance.	0.10	$30,000,000
C	Full cost of new product designs causes JATs prices to significantly exceed that of competitors.	0.70	$10,000,000
D	Global recession decreases demand for aircraft products.	0.25	$55,000,000
E	Internal product quality challenges consume excessive resources.	0.85	$70,000,000
F	Inability to attract and retain the best aerospace engineers and employees.	0.90	$50,000,000
G	Total time to develop, approve, and deliver new products to customers lags behind competitors.	0.45	$42,000,000
H	Environmental issues negatively impact JAT product design or manufacturing.	0.75	$75,000,000
I	Regulatory approval of new JAT products slows considerably.	0.50	$35,000,000
J	JATs level of product feature innovation falls behind that of main competitors	0.40	$60,000,000

*Measured as a probability (0% to 100%). **Measured by a composite score that includes financial, regulatory, business interruption, time horizon, and reputational impact.

Resource Module (Projected General Ledger Costs of Manufacturing Process Associated with the Two Products)

Materials		$20,000,000
Salaries and wages		10,000,000
Energy		5,000,000
License fee (environmental)		2,000,000
Environmental fines		4,000,000
Depreciation; pollution control equipment		2,000,000
		$43,000,000

Activity Module

	Resource Driver (Percentage Usage)
	Materials			Labor			Energy			Fees			Fines
Supervising process*	0	%		20	%		0	%		0	%		0	%
Setting up	3			14			18			0			0
Blending chemicals	80			30			25			0			0
Producing waste	10			4			17			20			0
Disposing of hazardous waste	6			20			9			30			70
Inspecting products	0			8			6			0			0
Monitoring release of air contaminants (CO2)	0			0			0			50			30
Operating pollution control equipment	1			4			25			0			0
	100	%		100	%		100	%		100	%		100	%

*Secondary activity whose costs are assigned to primary activities in proportion to the labor time used.

List of Activity Drivers

Activity Drivers	Activity Capacity
Setup hours	30,000
Direct labor hours (blending)	60,000	*
Pounds of wastes	15,000	*
Pounds of hazardous waste	18,000
Hours of inspection	6,000
Tons of air contaminants	10	*
Machine hours (pollution control)	5,000

*Capacity is flexible (i.e., acquired as needed, and always matches usage). Capacity for other activities is acquired in advance of usage. For example, setups are acquired in units (steps) of 950 hours. Projected usage for setups equals practical capacity.

Cost Object Module (Products and Projected Activity Usage)

Cost Objects	FLI 4HY		FLI 2LW
Expected output (pounds)	50,000		50,000
Setup hours	18,000		10,500
Direct labor hours (blending)	36,000		24,000
Pounds of waste	12,000		3,000
Pounds of hazardous waste	12,000		5,000
Hours of inspection	5,000		1,000
Tons of air contaminants	8		2
Machine hours (pollution control)	4,000		1,000

4. Consider the cost of activities (round all answers to three decimal places):

a. Determine the cost of the primary activities (e.g., setting up, blending chemicals, producing waste, disposing of hazardous waste, inspecting products, monitoring release of air contaminants, and operating pollution control equipment) for the proposed new activity-based cost management system. (Note: These costs will be part of the numerator when calculating the activity rates in Requirement 6.)

Cost of all activities:

Activity	Cost Assigned
Supervising process		$fill in the blank 28b4f9023fcf062_1
Setting up		fill in the blank 28b4f9023fcf062_2
Blending chemicals		fill in the blank 28b4f9023fcf062_3
Producing waste		fill in the blank 28b4f9023fcf062_4
Disposing of hazardous waste		fill in the blank 28b4f9023fcf062_5
Inspecting products		fill in the blank 28b4f9023fcf062_6
Monitoring release of air contaminants (CO2)		fill in the blank 28b4f9023fcf062_7
Operating pollution control equipment		fill in the blank 28b4f9023fcf062_8

b. Assign the cost of the secondary activity (supervising) to the primary activities. (Note: These costs also will be part of the numerator when calculating the activity rates in Requirement 6.)

Primary activity costs:

Setting up		$fill in the blank 28b4f9023fcf062_9
Blending chemicals		fill in the blank 28b4f9023fcf062_10
Producing waste		fill in the blank 28b4f9023fcf062_11
Disposing of hazardous waste		fill in the blank 28b4f9023fcf062_12
Inspecting products		fill in the blank 28b4f9023fcf062_13
Monitoring release of air contaminants (CO2)		fill in the blank 28b4f9023fcf062_14
Operating pollution control equipment		fill in the blank 28b4f9023fcf062_15