# Reducir, Inc., produces two different types of hydraulic cylinders. Reducir produces a major subassembly for the cylinders

## Question:

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.

## Step by Step Answer:

**Related Book For**

## Cornerstones of Cost Management

**ISBN:** 978-1285751788

3rd edition

**Authors:** Don R. Hansen, Maryanne M. Mowen