Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided:

Required:
1. Using the five most expensive activities, calculate the overhead cost assigned to each product. Assume that the costs of the other activities are assigned in proportion to the cost of the five activities.
2. CalculatetheerrorrelativetothefullyspecifiedABCproductcostandcommentontheoutcome.
3. What if activities 1, 2, 5, and 8 each had a cost of $650,000 and the remaining activities had a cost of $50,000? Calculate the cost assigned to Wafer A by a fully specified ABC system and then by an approximately relevant ABC approach. Comment on the implications for the approximately relevant approach.

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Expected Consumption Ratios Activity Driver Wafer A Wafer B Inserting and sorting process activities: 1. Developing test programs 2. Making probe cards 3. Testing products 4. Setting up batches 5. Engineering design 6. Handling wafer lots 7. Inserting dies Procurement process activities: 8. Purchasing materials 9. Unloading materials 10. Inspecting materials 11. Moving materials 12. Paying suppliers 50,000 60,000 600,000 135,000 Engineering hours Development hours Test hours Number of batches 0.25 0.10 0.60 0.55 0.15 0.45 0.70 0.75 0.90 0.40 0.45 0.85 0.55 0.30 90,000Number of change orders 300,000 Number of moves 700,000 Number of dies 400,000 60,000 75,000 500,000 30,000 $3,000,000 Number of purchase orders Number of receiving orders Inspection hours Distance moved Number of invoices 0.20 0.35 0.65 0.50 0.30 0.80 0.65 0.35 0.50 0.70 Total activity cost Unit-level (plantwide) cost assignmenta Activity cost assignment S2,100,000 S1,500,000 S900,000 $1,500,000