Simplifying the ABC System: Approximately Relevant ABC Systems mpany produces wafers for int Expected Consumption Ratios Wafer A Wafer B 1. Developing test programs 2. Making probe cards 3. Testing products 4. Setting up batches 5. Engineering design 6. Handling wafer lots 49,000 Engineering hours 0.25 0.10 0.60 0.55 0.20 0.45 0.70 0.75 65,000 Development hours 500,000 Test hours 145,000 Number of batches 94,000 Number of change orders 400,000 Number of moves 0.40 0.80 0.55 1,100,000 Number of dies 0.85 , 0.65 0.35 0.45 Number of purchase orders 0.15 400,000 8Purchasing materials 9. Unloading materials 10. Inspecting materials 11 Moving materials 63,000 Number of receiving orders 81,000 Inspection hours 100.000Distance moved Calculator 10. Inspecting materials 11. Moving materials 12. Paying suppliers 81,000 100,000 30,000 3,027,000 Inspection hours Distance moved Number of invoices 0.65 0.55 0.35 0.35 0.45 0.65 Total activity cost $2,118,900 $908,100 Activity cost assignment $1,567,500 $1,459,500 Calculated using number of dies as the single unit-level driver. Calculated by multiplying the consumption ratio of each product by the cost of each activity. Required: 1. Using the five most expensive activities, calculate the overhead cost assigned to each product. Assume that the cests of the other activities are assioned in proportion to the cost of the five activities. If required, round your answers to the nearest dollar Activity Testing products Handling wafer lots s Inserting dies Budgeted Activity Cost 240 PM- 2019 1. Using the five most expensive activities, to the cost of the five calculate the overhead cost assigned to each product. Assume that the costs of activities. If your answers to the nearest dollar Inserting dies Purchasing materials Moving materials Total activity cost 241 PM 4/16/2019 eBook g m Moving materials Total activity cost Approx. ABC Cost Wafer B 2. Calculate the error relative to the fully specified ABC product cost. Round your calculation to three decimal places and the percentage answer to one Relative error Wafer A Wafer B 3. What if activities 1, 2, 5, and 8 each had a cost of $608,000 and the remaining activities had a cost of $74,375 each? Calculate the cost assigned to Wafer A by a fully specified ABC system and then by an approximately relevant ABC approach. Cost by a fully specified ABC system Cost by an approximately relevant ABC approach 241 PM