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		2,000,000		0.70		0.30
8. Purchasing materials		Number of purchase orders		2,500		0.20		0.80
1. Developing test programs		Engineering hours		10,000		0.25		0.75
3. Testing products		Test hours		20,000		0.60		0.40
ABC assignments						$1,500,000		$1,500,000
Total overhead cost								$3,000,000

Required:

1. Form reduced system cost pools for activities 7 and 8. Round any division to 9 decimal places in your computations. Round your final answers to the nearest dollar.

Inserting dies cost pool	$fill in the blank 1
Purchasing cost pool	$fill in the blank 2

2. Assign the costs of the reduced system cost pools to Wafer A and Wafer B. Round any division to 9 decimal places in your computations. Round your final answers to the nearest dollar.

Wafer A	$fill in the blank 3
Wafer B	$fill in the blank 4

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.

Round any division to 9 decimal places in your computations. Round your final answers to the nearest dollar.

Developing test programs cost pool	$fill in the blank 5
Testing products cost pool	$fill in the blank 6

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

Wafer A	$fill in the blank 7
Wafer B	$fill in the blank 8