# Question: Reducir Inc produces two different types of hydraulic cylinders Reducir

Reducir, Inc., produces two different types of hydraulic cylinders. Reducir produces a major subassembly for the cylinders in the Cutting and Welding Department. Other parts and the sub-assembly are then assembled in the Assembly Department. The activities, expected costs, and drivers associated with these two manufacturing processes are given below.

Other overhead activities, their costs, and drivers are listed below.

Other production information concerning the two hydraulic cylinders is also provided:

Required:

1. Using a plantwide rate based on machine hours, calculate the total overhead cost assigned to each product and the unit overhead cost.

2. Using activity rates, calculate the total overhead cost assigned to each product and the unit overhead cost. Comment on the accuracy of the plantwide rate.

3. Calculate the global consumption ratios.

4. Calculate the consumption ratios for welding and materials handling (Assembly) and show that two drivers, welding hours and number of parts, can be used to achieve the same ABC product costs calculated in Requirement 2. Explain the value of this simplification.

5. Calculate the consumption ratios for inspection and engineering, and show that the drivers for these two activities also duplicate the ABC product costs calculated in Requirement 2.

Other overhead activities, their costs, and drivers are listed below.

Other production information concerning the two hydraulic cylinders is also provided:

Required:

1. Using a plantwide rate based on machine hours, calculate the total overhead cost assigned to each product and the unit overhead cost.

2. Using activity rates, calculate the total overhead cost assigned to each product and the unit overhead cost. Comment on the accuracy of the plantwide rate.

3. Calculate the global consumption ratios.

4. Calculate the consumption ratios for welding and materials handling (Assembly) and show that two drivers, welding hours and number of parts, can be used to achieve the same ABC product costs calculated in Requirement 2. Explain the value of this simplification.

5. Calculate the consumption ratios for inspection and engineering, and show that the drivers for these two activities also duplicate the ABC product costs calculated in Requirement 2.

## Answer to relevant Questions

Refer to the data given in Problem 4.34 and suppose that the expected activity costs are reported as follows (all other data remain the same): Other overhead activities: Activity Cost Purchasing ........ $ ...Golding Bank provided the following data about its resources and activities for its checking account process: Required: 1. Calculate the capacity cost rate for the checking account process. 2. Calculate the activity rates ...On April 1, Sangvikar Company had the following balances in its inventory accounts: Materials Inventory ...... $12,730 Work-in-Process Inventory .... 21,340 Finished Goods Inventory .... 8,700 Work-in-process ...Refer to Cornerstone Exercise 5.1 for data. In Exercise 5.1 Required: 1. Calculate the balance in Work in Process as of June 30. 2. Calculate the balance in Finished Goods as of June 30. 3. Calculate the cost of goods sold ...Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows: By ...Post your question