T1. Consumption RatiosLarsen, Inc., produces two types of electronic parts and has provided the following data:Part X12Part YK7TotalUnits producedDirect labor hoursMachine hoursNumber of setupsTesting hoursNumber of purchase ordersThere are four activities: machining, setting up, testing, and purchasing.Required:Overhead ActivityMachiningSetupsInspecting productsPurchasingOverhead ActivityPart X12Plantwide:Manufacturing100,00035,00052,50048Which product is undercosted?1,2006001. Calculate the activity consumption ratios for each product. Round your answers to two decimal places.Consumption Ratios600,00065,000297,500Part YK772Part X128,8003,400100,000350,0002. Calculate the consumption ratios for the plantwide rate (direct labor hours). Round your answers to two decimal places.Consumption Ratios12010,0004,000Activity DriverPart YK73. If the machine hours were used for the plantwide rate, would this remove the cost distortion of a plantwide rate?

Note : Consumption Ratio = Activity driver of that activity / Total activity

Consumption Ratios Larsen, Inc., produces two types of electronic parts and has provided the following data: Part X12 Part YK7 Overhead Activity Units produced Direct labor hours Machine hours Number of setups Testing hours 8,800 Number of purchase orders 3,400 There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. Round your answers to two decimal places. Consumption Ratios Machining Setups Inspecting products Purchasing Part X12 Overhead Activity 100,000 35,000 52,500 Plantwide: Manufacturing Which product is undercosted? 48 1,200 600 Part YK7 DN 600,000 65,000 297,500 Part X12 Total 72 100,000 350,000 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). Round your answers to two decimal places. Consumption Ratios Activity Driver 120 10,000 4,000 Part YK7 3. If the machine hours were used for the plantwide rate, would this remove the cost distortion of a plantwide rate?

Consumption Ratios Larsen, Inc., produces two types of electronic parts and has provided the following data: Part X12 Part YK7 Overhead Activity Units produced Direct labor hours Machine hours Number of setups Testing hours 8,800 Number of purchase orders 3,400 There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. Round your answers to two decimal places. Consumption Ratios Machining Setups Inspecting products Purchasing Part X12 Overhead Activity 100,000 35,000 52,500 Plantwide: Manufacturing Which product is undercosted? 48 1,200 600 Part YK7 DN 600,000 65,000 297,500 Part X12 Total 72 100,000 350,000 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). Round your answers to two decimal places. Consumption Ratios Activity Driver 120 10,000 4,000 Part YK7 3. If the machine hours were used for the plantwide rate, would this remove the cost distortion of a plantwide rate?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 4CE: Larsen, Inc., produces two types of electronic parts and has provided the following data: There are...

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Larsen, Inc., produces two types of electronic parts and has provided the following data: There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plantwide rate? Which product is undercosted? 3. What if the machine hours were used for the plantwide rate? Would this remove the cost distortion of a plantwide rate?
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