Yamaguchi Company makes printed circuit boards in a suburb of Kyoto. The production process is automated 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 labour 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. Yamaguchi makes three types of circuit boards, models 1, 2 and 3. Steps 1–3 of the design process for an ABC system have been completed. Exhibit 12.26 shows the process-based map of Yamaguchi’s operations.

Exhibit 12.26

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 10 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 Distinct parts M Direct material Model 1 ¥4,000 per board 20 40 60 Model 1 80 boards Assembly activity ¥857,600 Automatic insertions Activity Direct material Model 2 ¥6,000 per board Key: Soldering activity ¥808,400 Variable-cost resource Parts 1 15 30 40 3 Model 2 160 boards S Cost object Direct material Model 3 ¥8,000 per board Quality assurance activity ¥592,000 1 Off-page connectors Minutes Activity-consumption rates (per model 1 board): 20 distinct parts, 40 automatic insertions, 60 parts and 5 minutes of testing 10 16 20 2 Model 3 300 boards