Wallace Networking develops software for internet applications. The market is very Wallace Networking has just hired Nicole Merrell, a recent university graduate in competitive, and Wallace Networking's competitors continue to introduce new accounting. Merrell asks Software Department Manager Jeff Gire to join her in a products at low prices. Wallace Networking offers a wide variety of pilot activity based costing study. Merrell and Gire identify the following activities softwarefrom simple programs that enable new users to create personal related costs, and cost-allocation bases: webpages to complex commercial search engines. Like most software B (Click the icon to view the information.) companies, Wallace Networking's raw material costs are insignificant. Requirements Requirement 1. Compute the cost allocation rate for each activity. Determine the formula, then compute the cost allocation rate for each activity. (Round your answers to the nearest cent.) Activity overhead rate Data Table Activity Applications development Content production Estimated Estimated Indirect Allocation Quantity of Activity Costs Base Allocation Base 2,400,000 New applications 8 new applications 2,700,000 Lines of code 9 million lines 1,500 testing hours 5,370,000 Testing 270,000 Testing hours Total indirect costs Wallace Networking is planning to develop the following new applications: X-Pagesoftware for developing personal webpages X-Secure-commercial security and firewall software X-Page requires 580,000 lines of code and 190 hours of testing, while X-Secure requires 8.7 million lines of code and 1,140 hours of testing. Wallace Networking expects to produce and sell 60 000 units of X-Page and 16 units of X-Secure. Requirements 1. Compute the cost allocation rate for each activity. 2. Use the activity based cost allocation rates to compute the indirect cost of each unit of X-Page and X-Secure. (Hint: Compute the total activity costs allocated to each product line and then compute the cost per unit.) 3. Wallace Networking's original single-allocation-based cost system allocated indirect costs to products at $125 per programmer hour. X-Page requires 12,000 programmer hours, while X-Secure requires 18,000 programmer hours. Compute the total indirect costs allocated to X-Page and X-Secure under the original system. Then, compute the indirect cost per unit for each product. 4. Compare the activity-based costs per unit to the costs from the simpler original system. How have the unit costs changed? Explain why the costs changed as they did. 5. What are the clues that Wallace Networking's ABC system is likely to pass the cost-benefit test? Wallace Networking develops software for internet applications. The market is very Wallace Networking has just hired Nicole Merrell, a recent university graduate in competitive, and Wallace Networking's competitors continue to introduce new accounting. Merrell asks Software Department Manager Jeff Gire to join her in a products at low prices. Wallace Networking offers a wide variety of pilot activity based costing study. Merrell and Gire identify the following activities softwarefrom simple programs that enable new users to create personal related costs, and cost-allocation bases: webpages to complex commercial search engines. Like most software B (Click the icon to view the information.) companies, Wallace Networking's raw material costs are insignificant. Requirements Requirement 1. Compute the cost allocation rate for each activity. Determine the formula, then compute the cost allocation rate for each activity. (Round your answers to the nearest cent.) Activity overhead rate Data Table Activity Applications development Content production Estimated Estimated Indirect Allocation Quantity of Activity Costs Base Allocation Base 2,400,000 New applications 8 new applications 2,700,000 Lines of code 9 million lines 1,500 testing hours 5,370,000 Testing 270,000 Testing hours Total indirect costs Wallace Networking is planning to develop the following new applications: X-Pagesoftware for developing personal webpages X-Secure-commercial security and firewall software X-Page requires 580,000 lines of code and 190 hours of testing, while X-Secure requires 8.7 million lines of code and 1,140 hours of testing. Wallace Networking expects to produce and sell 60 000 units of X-Page and 16 units of X-Secure. Requirements 1. Compute the cost allocation rate for each activity. 2. Use the activity based cost allocation rates to compute the indirect cost of each unit of X-Page and X-Secure. (Hint: Compute the total activity costs allocated to each product line and then compute the cost per unit.) 3. Wallace Networking's original single-allocation-based cost system allocated indirect costs to products at $125 per programmer hour. X-Page requires 12,000 programmer hours, while X-Secure requires 18,000 programmer hours. Compute the total indirect costs allocated to X-Page and X-Secure under the original system. Then, compute the indirect cost per unit for each product. 4. Compare the activity-based costs per unit to the costs from the simpler original system. How have the unit costs changed? Explain why the costs changed as they did. 5. What are the clues that Wallace Networking's ABC system is likely to pass the cost-benefit test
