CONSUMPTION RATIOS; ACTIVITY RATES Gladmark Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows:

Scented Cards Regular Cards Inspection hours 40 160 Setup hours 50 50 Machine hours 200 600 Number of moves 225 75 The following activity data have been collected:

Inspecting products $3,000 Setting up equipment 3,750 Machining 6,000 Moving materials 1,350 Required:

. Calculate the consumption ratios for the four drivers.

. Is there evidence of product diversity? Explain.

. Calculate the activity rates that would be used to assign costs to each product.

. Suppose that the activity rate for inspecting products is $20 per inspection hour.

How many hours of inspection are expected for the coming year?

Exercise