Question

Activity	Expected Cost		Activity Driver	Activity Capacity
Setting up equipment	$132,000		Number of setups		120
Ordering materials	27,600		Number of orders		1,200
Machining	118,300		Machine hours		9,100
Receiving	34,320		Receiving hours		1,320

Silven produces two models of cell phones with the following expected activity demands:

		Model X		Model Y
Units completed		5,900		11,800
Number of setups		80		40
Number of orders		400		800
Machine hours		5,200		3,900
Receiving hours		440		880

1. Determine the total overhead assigned to each product using the four activity drivers.

	Total Overhead Assigned
Model X	$
Model Y	$

2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs. Round interim calculations to two decimal places and round your final answers to the nearest dollar.

	Total Overhead Assigned
Model X	$
Model Y	$

3. Using ABC as the benchmark, calculate the percentage error. Round your answers to two decimal places.

	Percentage Error
Model X	%
Model Y	%

Answer 1

Answer-1- SILVEN COMPANY

Activity	Expected Cost	Activity Capacity	Activity Driver	Cost per Activity
Setting up equipment	$132,000	120	Number of setups	1,100	per setup
Ordering materials	27,600	1,200	Number of orders	23	per order
Machining	118,300	9,100	Machine hours	13	per machine hour
Receiving	34,320	1,320	Receiving hours	26	per receiving hours

Activity	Cost per Activity		Model X		Model Y
Setting up equipment	1,100	per setup	80	88,000	40	44,000
Ordering materials	23	per order	400	9,200	800	18,400
Machining	13	per machine hour	5,200	67,600	3,900	50,700
Receiving	26	per receiving hour	440	11,440	880	22,880
				176,240		135,980

2-Setting up equipment-132,000+[(132,000/ 250,300 (132,000+118,300))*(27,600+34,320)]

=164,655

Machining-118,300+[(118,300/ 250,300)*(27,600+34,320)]

=147,565

New Activity Rates

Setting up equipment- 164,655/ 120= $1,372.13 per setup

Machining- 147,565/ 9,100= $16.22 per machine hour

	Model X	Model Y
Setting up equipment
1,372.13*80	109,770
1,372.13*40		54,885
Machining
16.22*5,200	84,344
16.22*3,900		63,258
Total overhead assigned	194,114	118,143

3-Model x- (194,114-176,240)/ 176,240 = 10.14%

Model y- (118,143-135,980)/ 135,980= 13.12%