Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year:

Silven produces two models of cell phones with the following expected activity demands:

Required:
1. Determine the total overhead assigned to each product using the four activity drivers.
2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs.
3. Using ABC as the benchmark, calculate the percentage error and comment on the accuracy of the reduced system. Explain why this approach may be desirable.

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Activity Expected Cost S126,000 18,000 126,000 Activity Driver Activity Capacity Number of setups Number of orders Machine hours 150 900 10,500 1,250 Setting up equipment Ordering materials Machining Receiving 30,000 Rceiving hours Model X Model Y Units completed Number of setups Number of orders Machine hours Receiving hours 5,000 100 300 6,000 375 10,000 50 600 4,500 875