Question

Equally Accurate Reduced ABC System Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity Expected Cost Activity Driver Activity Capacity Setting up equipment $126,000 Number of setups 150 Ordering materials 18,000 Number of orders 900 Machining 126,000 Machine hours 10,500 Receiving 30,000 Receiving hours 1,250 Silven produces two models of cell phones with the following expected activity demands:

Model X Model Y

Units completed 5,000 10,000

Number of setups 100 50

Number of orders 300 600

Machine hours 6,000 4,500

Receiving hours 375 875

Required: 1. Calculate the global consumption ratios for the two products. Round your answers to two decimal places. Global consumption ratios:

Model X 0.57 Model Y 0.43 (Already Answered)

2. Using the activity consumption ratios for number of orders and number of setups, show that the same cost assignment can be achieved using these two drivers as that of the complete, four-driver ABC system. In your calculations round amounts to two decimal places. Round your final answers to the nearest dollar.

Model X Model Y

Setting up equipment $ $

Ordering materials

Total Overhead assigned $ $

Answer 1

Activity cost	Amount	Cost driver	Number	Cost per cost driver (Activity Cost/Cost driver)
Setting up of equipment	126000	Number of setup	150	840
Ordering material	18000	No of orders	900	20
Machining cost	126000	Machine Hour	10500	12
Receiving	30000	Receiving hour	1250	24

Activity Cost Statement
	Cost per driver	Driver	Model X	Driver	Model Y
Number of Setup	840	100	84000	50	42000
No of orders	20	300	6000	600	12000
Machine Hour	12	6000	72000	4500	54000
Receiving hour	24	375	9000	875	21000
Total Allocated Cost			171000		129000

Units Completed		5000	Units	10000	Units
Total allocated cost		171000		129000
Cost per Unit		34.2		12.9