Simplifying the ABC System: Approximately Relevant ABC Systems Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided: Expected Consumption Ratios Activity Driver Wafer A Wafer B Inserting and sorting process activities: 1. Developing test programs $ 47,000 Engineering hours 0.75 2. 0.90 Making probe cards Development hours 0.25 0.10 0.60 0.60 3. 0.40 Test hours Testing products 4. 0.40 Setting up batches Number of batches 62,000 500,000 130,000 91,000 500,000 1,100,000 Number of change orders 0.15 0.85 5. 6. Engineering design Handling wafer lots Number of moves 0.60 0.40 0.70 7. 0.30 Number of dies Inserting dies Procurement process activities: 0.20 8. 0.80 Number of purchase orders Purchasing materials Number of receiving orders 0.30 0.70 9. Unloading materials 300,000 63,000 84,000 300,000 0.65 10. 0.35 Inspection hours Inspecting materials 0.45 0.55 11. Moving materials Distance moved 00 11. Moving materials Distance moved 0.55 0.35 300,000 33,000 $ 3,210,000 0.45 0.65 12. Paying suppliers Number of invoices Total activity cost Unit-level (plantwide) cost assignment $2,247,000 $963,000 Activity cost assignment $1,689,650 $1,520,350 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 costs of the other activities are assigned in proportion to the cost of the five activities. If required, round your answers to the nearest dollar. Activity Budgeted Activity Cost Testing products Handling wafer lots Inserting dies Purchasing materials Moving materials Purchasing materials Moving materials Total activity cost Approx. ABC Cost Wafer A 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 decimal place. Relative error Wafer A Wafer B 3. What if activities 1, 2, 5, and 8 each had a cost of $500,000 and the remaining activities had a cost of $151,250 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 eBook yg Calculator RDC Sumpproxy KETUVOITE AUG Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided: Expected Consumption Ratios Activity Driver Wafer A Wafer B Inserting and sorting process activities: 1. Developing test programs $ Engineering hours 0.25 47,000 62,000 2. Making probe cards 0.75 0.90 Development hours 0.10 3. Testing products 500,000 Test hours 0.60 0.40 4. 130,000 Number of batches 0.40 Setting up batches Engineering design 5. 91,000 Number of change orders 0.60 0.15 0.40 0.85 6. Handling wafer lots 500,000 Number of moves 0.60 7. Inserting dies 1,100,000 Number of dies 0.70 0.30 Procurement process activities: 8. Purchasing materials 300,000 Number of purchase orders 0.20 0.80 Number of receiving orders 0.30 0.70 9. 10. Unloading materials Inspecting materials 63,000 84,000 Inspection hours 0.65 0.35 11. Moving materials 300,000 Distance moved 0.55 0.45 eBook Calculator 11. Moving materials 12. Paying suppliers 0.55 300,000 33,000 Distance moved Number of invoices 0.45 0.65 0.35 Total activity cost $ 3,210,000 $963,000 Unit-level (plantwide) cost assignment Activity cost assignment $2,247,000 $1,689,650 $1,520,350 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 costs of the other activities are assigned in proportion to the cost of the five activities. If required, round your answers to the nearest dollar. Activity Budgeted Activity Cost Testing products Handling wafer lots Inserting dies Purchasing materials Moving materials Purchasing materials Moving materials Total activity cost Approx. ABC Cost Wafer A 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 decimal place. Relative error Wafer A Wafer B 3. What if activities 1, 2, 5, and 8 each had a cost of $500,000 and the remaining activities had a cost of $151,250 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