Question
Saludable Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows: Scented Cards Regular Cards Inspection hours
Saludable Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows:
Scented Cards | Regular Cards | |||
Inspection hours | 100 | 90 | ||
Setup hours | 90 | 30 | ||
Machine hours | 170 | 630 | ||
Number of moves | 210 | 55 |
The following activity data has been collected:
Inspecting products | $4,930 |
Setting up equipment | 4,700 |
Machining | 6,500 |
Moving materials | 1,370 |
Required:
1. Calculate the consumption ratios for the four drivers. Round your answers to two decimal places.
Scented Cards | Regular Cards | |
Inspection hours | ||
Setup hours | ||
Machine hours | ||
Number of moves |
2. Which of the following statements indicate there is product diversity?
Explain the significance of product diversity for decision making if the company chooses to use machine hours to assign all overhead.
If machine hours are used as the only driver, cards would receive 21% of the overhead, and cards would receive 79% of the overhead. Yet, the cards consume well over 53% of the non-machine related overhead. Thus, the Scented cards are , and the Regular cards are . This inaccuracy can adversely affect many decisions, including pricing, keep or drop, and cost-volume-profit.
3. Calculate the activity rates that would be used to assign costs to each product. Round your answers to the nearest cent.
Rates: | |
Inspecting products | $ per inspection hour |
Setting up equipment | $ per setup hour |
Machining | $ per machine hour |
Moving materials | $ per move |
4. Suppose that the activity rate for inspecting products is $20 per inspection hour. How many hours of inspection are expected for the coming year? If required, round your answer to nearest whole number of hours. inspection hours
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