Simplifying the ABC System: Equally Accurate Reduced ABC Systems

Selected activities and other information are provided for Patterson Company for its most recent year of operations.

						Expected Consumption Ratios
Activity		Driver		Quantity		Wafer A		Wafer B
7. Inserting dies		Number of dies		1,700,000		0.7		0.3
8. Purchasing materials		Number of purchase orders		2,500		0.2		0.8
1. Developing test programs		Engineering hours		11,500		0.25		0.75
3. Testing products		Test hours		18,500		0.6		0.4
ABC assignments						$170,000		$170,000
Total overhead cost								$340,000

Required:

1. Form reduced system cost pools for activities 7 and 8. Do not round interim calculations. Round your final answers to the nearest dollar.

Inserting dies cost pool	$
Purchasing cost pool	$

2. Assign the costs of the reduced system cost pools to Wafer A and Wafer B. Do not round interim calculations. Round your final answers to the nearest dollar.

Wafer A	$
Wafer B	$

3. What if the two activities were 1 and 3? Repeat Requirements 1 and 2.

Form reduced system cost pools for activities 1 and 3.

Do not round interim calculations. Round your final answers to the nearest dollar.

Developing test programs cost pool	$
Testing products cost pool	$

Assign the costs of the reduced system cost pools to Wafer A and Wafer B.

Wafer A	$
Wafer B	$