Simplifying the ABC System: Approximately Relevant ABC Systems Patterson Company produces wafers for Integrated circuits. Data for the most recent year are provided: Activity Inserting and sorting process activities: Driver Expected Consumption Ratios Wafer A Wafer B 1. Developing test programs $ 17,000 Engineering hours 0.25 0.75 2. Making probe cards 66,000 Development hours 0.10 0.90 3. Testing products 700,000 Test hours 0.65 0.35 4. Setting up batches 140,000 Number of batches 0.60 0.40 5. Engineering design 92,ODD Number of change orders 0.20 0.80 6. Handling wafer lots 500,000 Number of moves 0.40 0.60 7. Inserting dies 1,100,000 Number of dies 0.75 0.25 Procurement process activities: 8. Purchasing materials 500,000 Number of purchase orders 0.20 0.80 9. Unloading materials 61,000 Number of receiving orders 0.30 0.70 10. Inspecting materials 75,000 Inspection hours 0.60 0.40 11. Moving materials 400,000 Distance moved 0.50 0.50 12. Paying suppliers 31,ODD Number of invoices 0.30 0.70 Total activity cost $ 3,712,000 Unit-level (plantwide) cost assignment" Activity cost assignment" $2,784,000 $1,973,350 $928,000 $1,738,650 Calculated using number of dies as the single unit-level driver. Calculated by multiplying the consumption ratio of each product by the cost of each activity. Required: 1. Using the five most expensive activities, calculate the overhead cost assigned to each product. Assume that the costs of the other activities are assigned in proportion to the cast of the five activities. If required, round your answers to the nearest dollar. Activity Budgeted Activity Cost Testing products Handling wafer lots Inserting dies Purchasing materials Moving materials Total activity cost $ Wafer A Wafer B Approx. ABC Cost 2. Calculate the error relative to the fully specified ABC product cost. Round your calculation to three decimal places and the percentage answer to one decimal place. Wafer A Wafer B Relative error % 3. What if activities 1, 2, 5, and 8 each had a cost of $705,000 and the remaining activities had a cost of $111,500 each? Calculate the cost assigned to Wafer A by a fully specified ABC system and then by an approximately relevant ABC approach. Cost by a fully specified ABC system Cost by an approximately relevant ABC approach