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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Use the following information for Brief Exercises 5-21 and 5-22:

Zapato Company produces two types of boots: vaquero and vaquera. There are four activities associated with the two products. Drives for the four activities are as follows:

Chapter 5, Problem 21BEA, Use the following information for Brief Exercises 5-21 and 5-22: Zapato Company produces two types

5-21 Consumption Ratios

Refer to the information for Zapato Company given above.

Required:

  1. 1. Calculate the consumption ratios for the four drivers (round to two decimal places).
  2. 2. Is there evidence of product diversity? Explain.

1.

To determine

Calculate the consumption ratio for the four drivers.

Explanation

Consumption Ratio:

Consumption ratio is the fraction of each activity that is consumed by a product. Activity drivers are used to calculate the activity output, and then it is further used to calculate the activity consumption.

Use the following formula to calculate consumption ratio of Company Z’s Vaquero:

Consumption Ratio=Amount Of Activity Driver Per ProductTotal Driver Quantity

Consumption Ratio
Overhead ActivityAmount of Activity Driver Per ProductTotal Driver QuantityConsumption Ratio
 (A)(B)(A/B)
Cutting hours4,0009,4000.43
Assembly hours2,8507,5000.38
Inspection hours9503,3750

2.

To determine

Identify whether there is product diversity.

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