Simplifying the ABC System: Approximately Relevant ABC Systems Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided: Expected Consumption Ratios Wafer A Wafer B Activity Driver Inserting and sorting process activities: 1. Developing test programs $ 49,000 Engineering hours 0.25 0.75 2. Making probe cards 67,000 Development hours 0.15 0.85 3. Testing products 500,000 Test hours 0.65 0.35 4. Setting up batches 145,000 Number of batches 0.60 0.40 5. Engineering design 93,000 Number of change orders 0.15 0.85 Handling wafer lots 400,000 Number of moves 0.40 0.60 900,000 Number of dies 0.70 0.30 7. Inserting dies Procurement process activities: 8. Purchasing materials 500,000 Number of purchase orders 0.20 0.80 9. Unloading materials 63,000 Number of receiving orders 0.30 0.70 10. Inspecting materials 81,000 Inspection hours 0.70 0.30 11. Moving materials 200,000 Distance moved 0.55 0.45 12. Paying suppliers 35,000 Number of invoices 0.30 0.70 Total activity cost $ 3,033,000 $2,123,100 $909,900 Unit-level (plantwide) cost assignmenta Activity cost assignment $1,534,350 $1,498,650 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 cost of the five activities. If required, round your answers to the nearest dollar Activity Budgeted Activity Cost Testing products 325,000 X Handling wafer lots s 400,000 x Inserting dies s 900,000 X Purchasing materials s 500,000 X Moving materials 200,000 X Total activity cost s 3,033,000 Approx. ABC Cost Wafer A Wafer B s 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. Relative error Wafer A 19 Wafer B mu 3. What if activities 1, 2, 5, and 8 each had a cost of $709,000 and the remaining activities had a cost of $24,625 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