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 = $ 48,000 Engineering hours 0.25 0.75 2. Making probe cards 66,000 Development hours 0.10 0.90 3. Testing products 500,000 Test hours 0.00 0.40 4. Setting up batches 145,000 Number of batches 0.55 045 5. Engineering design 94,000 Number of change orders 0.15 0.85 6. Handling wafer lots 400,000 Number of moves 0.45 0.55 7. Inserting dies 700,000 Number of dies 0.70 0.30 Procurement process activities: 8. Purchasing materials 400,000 Number of purchase orders 0.20 0.80 9. Unloading materials 66,000 Number of receiving orders 0.30 0.70 10. Inspecting materials 76,000 Inspection hours 0.60 0.40 11. Moving materials 200,000 Distance moved 0.50 0.50 12, Paying suppliers 36,000 Number of inveices 0.30 0.70 Total activity cost $ 2,731,000 Unit-level (plantwide) cost assignment? $1,911,700 $819,300 Activity cost assignment $1,338,650 $1,302,350 ? Calculated using number of dies as the single unit-level driver. 5 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 s 500,000 Handling wafer lots 3 400,000 Inserting dies gs 700,000 Unit-level (plantwide) cost assignments $1,911,700 $819,300 Activity cost assignment $1,338,650 $1,392,350 Calculated using number of dies as the single unit-level driver. b 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 500,000 Handling wafer lots 400,000 Inserting dies 700,000 Purchasing materials 200,000 Moving materials Total activity cost Approx. ABC Cost Wafer A 1,427,568 Wafer B 1,303,432 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 $608,000 and the remaining activities had a cost of $37,375 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