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Saludable Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows:
Scented CardsRegular Cards
Inspection hours..............................1,080..............................720
Setup hours......................................420..............................180
Machine hours...................................960............................2,880
Number of moves.............................2,880..............................720
The following activity data have been collected:
Inspecting products..............................$45,000
Setting up equipment..............................28,500
Machining...........................................30,720
Moving materials...................................16,200
Required:
1. Calculate the consumption ratios for the four drivers (round to two decimal places).
2. Is there evidence of product diversity? Explain the significance of product diversity for decision making if the company chooses to use machine hours to assign all overhead.
3. Calculate the activity rates that would be used to assign costs to each product (round to two decimal places).
4. Suppose that the activity rate for inspecting products is $20 per inspection hour. How many hours of inspection are expected for the coming year?
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