Tokuga Company makes printed circuit boards in a suburb of Tokyo. The production process is auto-mated with computer-controlled robotic machines assembling each circuit board from a supply of parts and then soldering the parts to the board. Materials-handling and quality-assurance activities use a combination of labor and equipment. Although a few resources that are used are variable with respect to changes in the demand of boards, these costs are not material compared to the fixed-cost resources that are used.
Tokuga makes three types of circuit boards, models 1, 2, and 3. Steps 1 and 2 of the design process for an ABC system have been completed. Exhibit 12-23 shows the process-based map of Tokuga€™s operations.

1. Compute the cost of production for each of the three types of circuit boards and the cost per circuit board for each type.
2. What if the design of model 1 could be simplified so that it required only 8 distinct parts (instead of 20) and took only 3 minutes of testing time (instead of five). Compute the cost of model 1 circuit boards and the cost per circuit board. Will the costs per circuit board for models 2 and 3 change? You do not need to compute the costs per circuit board for models 2 and 3, only note whether the costs will increase, decrease, remain unchanged, or cannot be determined.Explain.

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Material Handling Activity $182,000 Activity 857,600 Activity 808,400 Quality Assurance Activity 592,000 Distinct Parts Automatic Insertions Parts Minutes Direct Material Model 1 4,000 per Board Direct Material Model 2 6,000 per Board Direct Material Model 3 18,000 per Board 1 15 30 40 3 Model 2 160 Boards 20 40 60 5 Model 1 80 Boards 1 1016 20 2 Model 3 300 Boards Activity-consumption rates (per model 1 board): 20 distinct parts, 40 automatic insertions, 60 parts, and 5 minutes of testing LEGEND Exhibit 12-23 Tokuga Company's Two-Stage ABC System