What if activities 1, 2, 5, and 8 each had a cost of $714,000 and the remaining activities had a cost of $21,000 each? Calculate the cost assigned to Wafer A by a fully specified ABC system and then by an approximately relevant ABC approach.
Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided: Expected Consumption Ratios Activity Driver Wafer A Wafer B Inserting and sorting process activities: 1 Developing test programs $ 47,000 Engineering hours 0.25 0.75 2. Making probe cards 69,000 Development hours 0.10 0.90 3. Testing products 600,000 Test hours 0.65 0.35 4. Setting up batches 130,000 Number of batches 0.55 0.45 5. Engineering design 98,000 Number of change orders 0.20 0.80 6. Handling wafer lots 400,000 Number of moves 0.45 0.55 7. Inserting dies 800,000 Number of dies 0.75 0.25 Procurement process activities: 8. Purchasing materials 500,000 Number of purchase orders 0.15 0.85 9. Unloading materials 66,000 Number of receiving orders 0.35 0.65 10. Inspecting materials 80,000 Inspection hours 0.60 0.40 11. Moving materials 200,000 Distance moved 0.55 0.45 12. Paying suppliers 34,000 Number of invoices 0.30 0.70 Total activity cost $ 3,024,000 Unit-level (plantwide) cost assignmenta $2,268,000 $756,000 Activity cost assignmentb $1,546,050 $1,477,950 a Calculated using number of dies as the single unit-level driver. b 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 cost of th activities. required, round your answers to nearest ollar. Activity Budgeted Activity Cost Testing products $ 725,760 Handling wafer lots 483,840 Inserting dies 967,680 V Purchasing materials 604,800 Moving materials 241,920 Total activity cost $ 3,024,000 Approx. ABC Cost Wafer A $ 1,639,008 Wafer B 1,384,992 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 6.0 % Wafer B -6.3 % 3. What if activities 1, 2, 5, and 8 each had a cost of $714,000 and the remaining activities had a cost of $21,000 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 $ 588,000 Cost by an approximately relevant ABC approach 587,300 X Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided: Expected Consumption Ratios Activity Driver Wafer A Wafer B Inserting and sorting process activities: 1 Developing test programs $ 47,000 Engineering hours 0.25 0.75 2. Making probe cards 69,000 Development hours 0.10 0.90 3. Testing products 600,000 Test hours 0.65 0.35 4. Setting up batches 130,000 Number of batches 0.55 0.45 5. Engineering design 98,000 Number of change orders 0.20 0.80 6. Handling wafer lots 400,000 Number of moves 0.45 0.55 7. Inserting dies 800,000 Number of dies 0.75 0.25 Procurement process activities: 8. Purchasing materials 500,000 Number of purchase orders 0.15 0.85 9. Unloading materials 66,000 Number of receiving orders 0.35 0.65 10. Inspecting materials 80,000 Inspection hours 0.60 0.40 11. Moving materials 200,000 Distance moved 0.55 0.45 12. Paying suppliers 34,000 Number of invoices 0.30 0.70 Total activity cost $ 3,024,000 Unit-level (plantwide) cost assignmenta $2,268,000 $756,000 Activity cost assignmentb $1,546,050 $1,477,950 a Calculated using number of dies as the single unit-level driver. b 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 cost of th activities. required, round your answers to nearest ollar. Activity Budgeted Activity Cost Testing products $ 725,760 Handling wafer lots 483,840 Inserting dies 967,680 V Purchasing materials 604,800 Moving materials 241,920 Total activity cost $ 3,024,000 Approx. ABC Cost Wafer A $ 1,639,008 Wafer B 1,384,992 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 6.0 % Wafer B -6.3 % 3. What if activities 1, 2, 5, and 8 each had a cost of $714,000 and the remaining activities had a cost of $21,000 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 $ 588,000 Cost by an approximately relevant ABC approach 587,300 X
